The Russian leader, whose tardiness has become legendary, kept Abe waiting during a Russia-Japan summit at the Eastern Economic Forum in Vladivostok on Monday, Kyodo News and Yomiuri Shimbun reported.
The proposal means that resolving the bilateral issue on the northern territories would effectively be put aside and a conclusion of the peace treaty would happen first.
Vostok-2018 is taking place at a time of heightened tension between the West and Russian Federation, and North Atlantic Treaty Organisation has said it will monitor the exercise closely, as will the United States which has a strong military presence in the Asia-Pacific region.Russia's Ministry of Defence broadcast images on Tuesday of columns of tanks, armoured vehicles and warships on the move, and combat helicopters and fighter aircraft taking off.
The top government spokesman also said Japan will not change its position of seeking to resolve the issue of the islands' sovereignty, before concluding the peace treaty with Russian Federation.
The dispute between Russian Federation and Japan centers on the four southernmost islands in the Kuril chain which the Soviet Union occupied at the end of World War II in 1945 but are claimed by Japan.
"Okay", Putin said, before proposing they sign a peace treaty. In 1956, the two countries signed a common declaration on ending the state of war and restoring diplomatic and all other relations, however, a peace treaty has still not been reached.More news: Apple launches iPhone XS and XS Max with Super Retina OLED displays
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Speaking before Putin, Abe asserted that Japan and Russian Federation "have a duty to future generations" regarding the islands dispute. President Vladimir Putin earlier offered to sign the peace treaty "without any preconditions". Japan routinely protests over Russian economic and military activity on the Kuril Islands.
A Japanese government spokesman said the country's stance had not changed.
The Japanese prime minister for his part said the two countries "have a duty to future generations". They attended a roundtable meeting on regional cooperation and visited "The Far East Street" exhibition showcasing the rich local cultural exchanges between the two countries and investment opportunities in Russia's Far East regions.
The Kurils, which lie north of Japan's Hokkaido island, have been controlled by Moscow since they were seized by Soviet troops in the dying days of World War II.
"We have been trying to solve the territorial dispute for 70 years".