Japan hinted Friday it could freeze its plan to buy South Korean government bonds as a deepening diplomatic rift over disputed islands threatened to spill over into economic ties. The threat came as Japan's lower house of parliament passed its first resolution on the barren islets since 1953 and as Prime Minister Yoshihiko Noda said South Korea was "illegally occupying" them.
Noda told lawmakers his government "will act firmly" in response to South Korean President Lee Myung-Bak's visit to Seoul-controlled islands called Dokdo in South Korea and Takeshima in Japan. Finance Minister Jun Azumi, who has already cancelled a planned trip to meet his counterpart in Seoul and suggested he would review a currency swap deal, said he was undecided if the bond purchase should go ahead.
"I would like to wait and see," he told a press conference, adding he would make a decision only after Lee apologised "for his excessive behaviour".
Japan, South Korea and China had agreed in May to hold each other's government bonds at a meeting of finance ministers and central governors. Lee's August 10 visit to the Seoul-controlled islets badly riled Tokyo.
Comments a few days later in which he said Emperor Akihito had to apologise over crimes committed by Japan during its occupation of the Korean peninsula if he ever wanted to visit South Korea compounded the problem in Japanese eyes.
Japan's lower house Friday adopted a resolution that "strongly condemns" Lee's visit and his comment on the emperor, adding Japan "strongly demands that South Korea halt its illegal occupation of Takeshima as soon as possible". Noda reiterated Lee's comment on the emperor "is difficult to comprehend" and the president should "apologise for and retract it".
The prime minister later told a press briefing that the spat was about "whether South Korea's unilateral occupation (of the islands) meets the standards of law and justice in the international community", calling for the two nations to resolve their dispute at the International Court of Justice.
Noda's comments came the day after a diplomatic dance over a letter he sent to Lee, which saw Seoul eventually sending the unopened note by registered mail after Japan refused to accept it back.