Quoting government sources, Kyodo reported Wednesday the government plans to bring the islands, purchased from the family of businessman Kunioki Kurihara for 2.05 billion yen ($26.15 million), under the state control.
The Senkaku islands in the East China Sea, which are called Diaoyu in China, are uninhabited but lately have become a subject of bitter territorial dispute with China, in which the United States also could be drawn in under treaty terms with Japan if the situation worsens. Taiwan also has a claim on the islands.
The government and the Kurihara family will exchange an official contract on the purchase likely by month end, the sources told Kyodo.
The sources said Deputy Chief Cabinet Secretary Hiroyuki Nagahama, representing Japanese Prime Minister Yoshihiko Noda's government, secretly met with a member of the family on Monday and reached the agreement.
The report said the latest move is likely to further strain the already tense relations with China.
Metropolitan Tokyo Gov. Shintaro Ishihara, who also has been trying to buy three of the major islands, was quoted as telling reporters Wednesday the Kurihara family was yet to make up its mind on the sale. Kyodo also was quoted as saying a special advisor to Noda had requested him to approve the purchase.
The islands have been administrated by Japan since 1895, but China and Taiwan have been stressing their claims after a study showed there might energy reserves around the islands, Kyodo said. Of the five islands, the Japanese government already owns the Taisho island and leases the others from the family owners.
The dispute with China escalated sharply after Chinese activists and Japanese local assembly members made separate landings last month on Uotsuri, one of the five islets in the group, to assert their sovereignty.
Recently, China's official media quoted the Chinese Defense Ministry that its armed forces have the "confidence, capability" and unwavering determination to defend the islands. A ministry spokesman said the Chinese military is closely watching Japan's moves.
China's official Xinhua news agency also reported the deal to purchase the islands, quoting local media.
The report quoted an earlier statement by a Chinese Foreign Ministry spokesman that any "unilateral action by Japan regarding the Diaoyu Islands" would be illegal and invalid as the islands have been China's inherent territory since ancient times.
In other developments, Chinese authorities said they were holding two men accused of ripping the flag off the car of Japanese ambassador in Beijing recently, apparently to protest over the island issue.
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