Japan today released a Chinese trawler captain at the heart of a intense territorial row with China that Tokyo had warned was threatening to damage Asia's two biggest economies, Japanese media reported.
Kyodo news agency and other Japanese media said prosecutors had freed the Chinese fishing boat captain, whose trawler collided earlier this month with two Japanese patrol boats in waters near islands both sides claim, sparking a bitter row.
The decision reflected consideration for Sino-Japanese ties, Kyodo quoted the prosecutors as saying.
"The Chinese government will welcome this," said Liu Jiangyong, an expert on Japan at Tsinghua University in Beijing.
"I think this will be a turning point, a symbolic step, that will now ease the tensions that have risen between China and Japan."
Finance Minister Yoshihiko Noda warned earlier that worsening ties between the two countries would be bad for both economies.
"A cooling of relations between Japan and China over the Senkaku problem would be bad for Japan's economy, but it would also be a minus for China," he told a news conference. "It's desirable that both sides respond in a calm manner."
Sino-Japanese ties had improved after a deep chill in 2001-2006, but the latest feud underscored the fragility of relations long plagued by disputes over wartime history and rivalry over territory, resources and mutual military suspicions.
Japan's sluggish economy has become increasingly reliant on China's dynamism for growth. China has been Japan's biggest trading partner since 2009 and bilateral trade reached 12.6 trillion yen (£95bn) in the January-June period, a jump of 34.5 percent over the same time last year, Japanese data show.
"The Japanese economy's future performance seems to depend on whether the problem is solved quickly," Japanese Economics Minister Banri Kaieda told a news conference.
China has cancelled diplomatic meetings and student visits to protest against the trawler captain's detention, and concerns are simmering that Beijing is holding back shipments of rare earth minerals vital for electronics goods and auto parts.
Trade Minister Akihiro Ohata told a separate news conference that Tokyo had confirmed there was no official export ban, but added that the ministry was still looking into the matter after hearing from traders that exports had been suspended.
Analysts said the trawler dispute was in part a row over sovereignty in an area with rich natural gas resources. The islands are known as the Diaoyu islands in China and the Senkaku island in Japan. The deadline for Japanese prosecutors to decide whether to charge the trawler captain was September 29.
Beijing also has territorial disputes with southeast Asian nations in the South China Sea, where Washington has come out in favour of a multilateral approach, raising China's hackles.
"China is becoming more assertive and is finding out that everyone doesn't like being walked over," said Jeffrey Kingston, director of Asian studies at Temple University's Japan campus.
Japanese Chief Cabinet Secretary Yoshito Sengoku, commenting on the affair, said it was important for the two countries to foster strategic, mutually beneficial relations -a nod to the deep economic ties that would be at risk if the row worsens.
Sengoku also said Japan saw no link between the islets row and the detention of four Japanese nationals who were being investigated on suspicion of violating Chinese law regarding the protection of military facilities.
A Japanese foreign ministry spokesman confirmed earlier in the day that four Japanese nationals employed by unlisted construction firm Fujita Corp had been detained.
A spokeswoman for Fujita Corp said that five of its employees were missing in China - four Japanese nationals and one Chinese national. But they had no firm information on their whereabouts.
She said the employees were in China in connection with a project to dispose of chemical weapons abandoned in China by the Japanese military at the end of World War Two.
Japan has been assisting in the disposal of chemical weapons left behind by its Imperial Army during World War Two as part of efforts to improve bilateral relations.