The government spokesman, Kocihi Kato, yesterday said an official protest had been made to Moscow over the lease, which covers around 700 acres on the small island of Shikotan.
Most embarrassing of all is the fact that a Japanese national appears to be one of the main businessmen behind the deal. The lease agreeement between Carlson & Kaplan Co in Hong Kong and the Sakhalin provincial authorities who administer the Kuriles is supposed to be for the building of a casino and hotel complex. But the Japanese government suspects it was an attempt at property speculation in advance of the possible return of the islands to Japan.
'Japan cannnot condone a contract between Russia and a third party that treats Moscow's illegal occupation of the Northern Islands (Japan's term for the Kuriles) as an accomplished fact,' Mr Kato told a press conference. He desribed the contract as 'impermissible'.
Japan claims the four southernmost Kurile islands, which were occupied by Soviet troops at the end of the last war, to be traditional Japanese territory. But the Kurile dispute, which up to recently Tokyo thought could be solved easily in the aftermath of the Cold War, has now turned into a diplomatic nightmare for the Japanese government.
Tokyo's tough stance with Moscow appears to have backfired, pushing a final resolution of the dispute further into the future. And it has highlighted Japan as the only leading developed nation refusing to consider substantial economic aid to Russia.
It has also soured the air for other Japanese diplomatic initiatives. Tokyo is to host a conference on aid to the former Soviet republics at the end of next month. Originally Japan intended to take up a proposal to help Russia dispose of its nuclear weapons materials. But now a Japanese official has said sulkily that Tokyo is 'in no mood to call for international co-operation on the peaceful use of Russian nuclear materials' at the conference.
The Hong Kong-based firm that signed the lease agreement is a shell company, and the Japanese Foreign Ministry was horrified when it emerged that one of the firm's executives was a Taiwanese man who became a Japanese citizen in 1972. Tokyo has discouraged Japanese business from investing in Russia, particularly in the Kuriles, until Moscow agrees to give the islands back.