Japan infuriates China by agreeing to buy disputed isles

A fishing boat with hoisted Japanese national flags, sails around a group of disputed islands known as Senkaku in Japan and Diaoyu in China in the East China Sea September 2, 2012.

TOKYO/BEIJING (Reuters) - Japan has agreed to buy a group of islands disputed with China from their private owners, a government official said on Monday, prompting an angry rebuke from China a day after Chinese President Hu Jintao warned against such an "illegal" move.

Japan aimed to nationalize the uninhabited islands in the East China Sea as soon as possible to control them in a peaceful and stable manner, Chief Cabinet Secretary Osamu Fujimura said.

The islands, called Senkaku in Japan and Diaoyu in China, are near rich fishing grounds and potentially huge maritime gas fields and have been at the heart of long-running territorial disputes between the world's second and third-largest economies.

Tension flared anew last month when Japan detained a group of Chinese activists who landed on the islands. But the row may now be having an economic impact, intensifying from merely an exchange of rhetoric, with a Chinese official saying Japanese car sales may have been hit in the world's biggest auto market.

"This is just the ownership of land, which is part of Japan's territory, moving from one (private) owner to the state, and should not cause any problem with other countries," Fujimura said.

"Having said that, we don't want the Senkaku issue to affect overall Sino-Japanese relations. Because it is important to avoid misunderstanding and unforeseen development, we have been closely communicating with China through diplomatic channels to this day."

But China was firm in its opposition to what it saw as a "political trend".

"This is a serious infringement of China's sovereignty and has seriously hurt the feelings of 1.3 billion Chinese..." the Foreign Ministry said in a statement. "The Chinese government and people express their resolute opposition and protest strongly."

Chinese Foreign Minister Yang Jiechi called in Japanese Ambassador Uichiro Niwa to lodge a strong protest, while state-run Xinhua news agency cited Premier Wen Jiabao as saying China would "never yield an inch" of territory.

JAPANESE CAR SALES HIT

Japanese Prime Minister Yoshihiko Noda initially floated the idea of nationalizing the islands in July to fend off the Governor of Tokyo, Shintaro Ishihara, a harsh critic of China, and his own plan to buy the islands which could have had even more severe diplomatic repercussion.

Fujimura did not disclose the purchase price, but Japanese media said last week the government was set to pay 2.05 billion yen ($26.26 million).

Relations between the Asian powers, plagued by Japan's wartime occupation of parts of China and present rivalry over regional clout, have been difficult for years. But economic ties are stronger than ever and both countries are believed to want to keep the feud from spiraling out of control.

However the islands row appears to have hit sales of Japanese cars.

Dong Yang, secretary general of the China Association of Automobile Manufacturers, said Japanese car sales in China had slowed in August and he believes it was related to the dispute.

Nissan's chief operating officer, Toshiyuki Shiga, said last week that the row was having "some impact" on sales of Japanese cars as manufacturers were having difficulty in holding big, outdoor sales promotion campaigns.

President Hu warned Japan against buying the islands on Sunday.

"It is illegal and invalid for Japan to buy the islands via any means. China firmly opposes it," China's CCTV quoted Hu as telling saying Noda on the sidelines of an Asia-Pacific Economic Cooperation (APEC) summit in Vladivostok.

"China will unswervingly safeguard its sovereignty. Japan must realize the severity of the situation and not make a wrong decision." ($1 = 78 yen)

(Additional reporting by Ben Blanchard and Xu Wan in Beijing; Writing by Nick Macfie)