The government and Tupac Amaru Revolutionary Movement (MRTA) rebels agreed on Tuesday to push on with further negotiations after a first face-to- face meeting to end the standoff that began on 17 December.
"We have agreed [on] the procedures to follow in future conversations and we have agreed to continue the conversations at a date yet to be set," mediators said in a statement.
Japan's Foreign Ministry reacted positively to the meeting. Ministry spokesman Hiroshi Hashimoto said in a statement that his government hoped "the talks will pave the way for the start of full negotiations so that the incident can be solved peacefully, and the hostages freed early."
MRTA rebels stormed the Japanese envoy's home on in December, demanding the release of comrades held in Peruvian jails in exchange for the lives of 500 hostages.
Fujimori, who has spent the last four days in London, told reporters that Peru was seeking a country willing to grant asylum to the hostage- takers but would not give in to the rebels' main demand or pay ransoms for the hostages' release.
But he told Japan's Mainichi Shinbum newspaper in an interview that he suspects some Japanese companies or families may have paid ransoms.
Commenting on the report, Japan's top spokesman, Seiroku Kajiyama, said the government had no knowledge of ransoms being paid. "From our contacts with firms and families with hostages in the residence, we understand that no ransom has been paid," he said.
In London, Mr Fujimori wonJohn Major's support for his handling of the crisis and tried to convince investors it was an "isolated case" that would not harm Peru's economy.