Japan said on Tuesday it had decided to grant 74 billion yen ($659 million) in low-interest loans to China, more than two months after it delayed a decision on the aid because of strains in bilateral ties.
The decision on the loans for the year ended last March, made by a top government panel on foreign aid strategy, follows signs of a potential thaw in the chilly Sino-Japanese relationship.
Two-way ties have deteriorated since Prime Minister Junichiro Koizumi took office in 2001 and began annual visits to Tokyo's Yasukuni shrine, where some convicted war criminals are honoured along with Japan's millions of war dead.
Koizumi told reporters the decision had been made after an overall assessment of the situation, adding that he "always attached importance" to Sino-Japanese ties.
"I believe the development of China will be a good thing for Japan," he added.
Chinese Foreign Ministry spokesman Liu Jianchao told a news conference that Japan's past aid had been positive for the relationship and expressed regret that some people in Japan had "cooked up" the issue into a sensitive matter this year.
"We welcome Japanese expressions that they pay great attention to relations with China. But just attaching importance to it is not enough. They have to take concrete steps to improve the development of relations," Liu added. Beijing has often said the Yasukuni visits are the biggest obstacle to better ties. Japanese Farm Minister Shoichi Nakagawa, known for his hard line against Beijing, said he was perplexed by the decision.