Countries wrap up peace treaty summit

Japan and Russia on Friday struck economic deals to build confidence towards a peace treaty to formally end World War II that has been prevented by a spat over Russian-occupied islands claimed by Tokyo.

The second and final day of talks in Tokyo comes after Prime Minister Shinzo Abe and President Vladimir Putin met Thursday in Abe's ancestral hometown in western Japan in the hopes of achieving a breakthrough.

But despite a "frank" exchange of views the leaders announced no major headway on a peace treaty, though they did make progress on ways to cooperate economically, including in the contested area.

Abe, speaking at a luncheon with Putin, said they had agreed on "more than 60 projects" in economic-related areas, with details to be announced at a news conference later in the day.

"I believe there are a wide range of areas where Japan and Russia have not exercised our fullest potential, despite the fact that we are neighbouring nations," Abe said.

Putin said business ties were a way to build confidence.

"Our work together on the economic front will help us create a foundation to improve relations," he said.

Local media reported Japan was expected to agree to provide an economic package worth about 300 billion yen ($2.5 billion), including private sector projects in areas such as mining, and loans for natural gas exploration and economic development in Russia's Far East.

The Soviet Union seized four islands off Japan's northern coast in 1945 in the closing days of the war.

'Legal position'

The dispute over the islands, known as the Southern Kurils in Russia and the Northern Territories in Japan, has prevented the two sides from fully putting the conflict behind them.

The summit is the latest attempt to reach an agreement since Japan and the former Soviet Union began discussions in 1956.

Putin, who is accomplished in the Japanese martial art of judo, has said he sees the lack of a peace treaty as an "anachronism" and wants to resolve the issue, while acknowledging that progress has been "difficult".

Abe has looked to win concessions by dangling the prospect of major Japanese investment in front of Moscow, which is mired in an economic crisis made worse by falling oil prices and Western sanctions over Crimea and Ukraine.

He said Thursday that the two discussed joint economic development of the islands and making it easier for former Japanese residents, whose average age is 81, to visit.

Yuri Ushakov, a Kremlin adviser, told reporters Thursday that the two leaders called for experts to find ways to achieve joint exploitation of the four islands, citing "fishing, tourism, culture and medicine".

Business leaders from the two countries are also meeting Friday.

But few believe Putin is likely to hand the islands back, not least because of their strategic value sitting astride the entrance to the Sea of Okhotsk as well as Russian pride at having taken them as spoils of war.

A Japanese official briefing reporters on the summit suggested that legal questions could be a formidable stumbling block, notably regarding the regulatory framework for any economic projects in the islands.

"In any case, not damaging our country?s legal position is a prerequisite to joint economic activities on the four islands," he said.