Hundreds of villagers were evacuated and schools and businesses shut down in Taiwan Friday as it prepared for the arrival of Typhoon Soulik, expected to pound the island with powerful winds and heavy rain over the weekend.

Offices and schools closed in Taipei and eight other cities with residents advised to stay indoors as the typhoon churns towards the island.

Packing winds of up to 209 kilometres an hour (130 miles), Soulik is expected to make landfall on the north-east coast around 3am Saturday (1900 GMT Friday), the Central Weather Bureau said.

The bureau downgraded Soulik from a super typhoon to a moderate typhoon but warned residents across the island to prepare for "extreme torrential rain" -- classified as 350mm (13 inches) within 24 hours -- and rough seas.

More than 600 residents were evacuated from six low-lying aboriginal riverside villages outside the capital city on Friday morning.

"I saw TV reporting that the typhoon may bring in up to one metre of rainfall. That would be terrible and reminded me of the painful memories last year," Ginghong Izan, a male migrant from the Amei aboriginal tribe told AFP, speaking outside his home in Hsichou village.

"My TV, computer, refrigerator and furniture were all were flooded when (Typhoon) Saola hit in August. It cost me around Tw$200,000 ($6,670)," the 52-year-old said, adding that he started moving valuables to higher parts of his house two days ago.

Saola left six dead, two missing and 16 wounded in Taiwan after taking 23 lives in the Philippines.

Others in the village were busy packing up their personal belongings to take with them and were reinforcing the roofs of the wooden homes they had to leave behind.

In Wuchieh, a township in the northeastern Yilan county -- which is forecast to bear the brunt of Soulik -- over 2,000 sandbags were snatched up by residents and two amphibious military vehicles deployed for rescue.

Waves as high as 1.5 metres were hitting the shore in Yilan on Friday afternoon as coastguards patrolled the beach to warn visitors to stay away while hundreds of fishing boats sought shelter.

"Many farmers have harvested rice, fruits and vegetables early as the typhoon is expected to impact our area," said Huang Hai-tao, an official in Jiaosi, a popular tourist destination in Yilan.

"The typhoon has also caused some damage to tourism as more than 90 percent bookings for this weekend have been cancelled."

A coastal highway in Yilan where 20 Chinese tourists were killed by landslides caused by Typhoon Megi in 2010 was also closed.

More than 2,000 tourists had already been evacuated from the remote Green Island, south east of Taiwan, on Thursday.

In the capital Taipei, schools and businesses closed and in Songshan district one neighbourhood politician toured the streets in his car warning people over a loudspeaker to leave work and go home by 2pm local time (0700 GMT).

Local television reported traffic gridlock in the capital as people left work early, desperate to get home.

The storm has disrupted travel to and from Taiwan with 65 flights cancelled according to the transport authorities.

President Ma Ying-jeou urged government units and the public "not to let their guards down" in a statement Friday, after inspecting the central government's disaster response centre.

Measuring 280 kilometres across, Soulik was 360 kilometres east-southeast of Yilan at 0600 GMT, according to the weather bureau.

It predicted that the impact would be strongest early Saturday.

Soulik was moving southeast of Ishigaki island, southwestern Okinawa, with gusts of up to 216 kilometres per hour and high waves of 12 metres earlier Friday.

"We have not so far received any reports of injuries or damage to buildings due to the typhoon," an Ishigaki city official said.

Soulik is moving along the same route as 1996 super-typhoon Herb, which left 51 dead and 22 missing in Taiwan, although it is moving faster, according to the weather bureau.

In August 2009 Typhoon Morakot killed about 600 people in Taiwan, most of them buried in huge landslides in the south, in one of the worst natural disasters to hit the island in recent years.