TOKYO (REUTERS) - Japanese Prime Minister Shinzo Abe and Russian President Vladimir Putin held a second day of talks on Friday (Dec 16) after Mr Abe made little headway a day earlier in his quest to resolve a territorial row that has festered since World War Two.
Mr Putin looked set to come away with promises of economic cooperation and achieve what experts said was a key goal - easing his international isolation when Moscow is under fire over the destruction of eastern Aleppo in Syria, where Russia is backing Syrian President Bashar al-Assad's forces.
Mr Putin said the economic cooperation would help set the stage for closer ties.
"I believe that joint work in economic areas will help to establish the basis needed to move to a relationship of true partnership," he said at the start of talks in Tokyo.
Japan and Russia agreed on day one of the summit, held at a hot spring resort in southwest Japan, on the importance of continuing security dialogue, a Japanese official said.
Ministerial level security talks were halted after Russia annexed Ukraine's Crimea region in 2014, when the United States and other Western nations imposed sanctions on Moscow.
They also agreed to start discussing economic cooperation on the disputed islands, a row over which has kept them from signing a peace treaty formally ending World War Two, a Russian official said.
"Abe must be bitterly disappointed," said James Brown, a professor at Temple University's Japan campus. "Putin has given away absolutely nothing and, in return, he has received the offer of enhanced economic cooperation. Just as valuably, he has demonstrated divisions in G-7 (Group of Seven) policy on Russia and has encouraged Japan to distance itself from U.S. policy," he added.
The islands in the Western Pacific, called the Northern Territories in Japan and the Southern Kuriles in Russia, were seized by Soviet forces at the end of World War Two.
As the two leaders headed for the talks, right-wing activists in soundtrucks circled the streets not far from the prime ministers' office, blaring "Return the islands" and "Putin Go Home".
The Russian Direct Investment Fund (RDIF) and Japan Bank for International Cooperation (JBIC) signed a memorandum of understanding (MOU) to establish a US$1 billion (S$1.44 billion) investment fund to promote economic cooperation between the two countries.
Novatek Chief Executive Leonid Mikhelson said on Friday his company had signed agreements with Japan's Mitsui & Co, Mitsubishi Corp and Marubeni Corp on the Arctic LNG-2 project.
Kremlin economic aide Yuri Ushakov said on Thursday that the two sides would issue a statement about possible joint economic activity on the disputed islands on Friday, adding such activity would be based on Russian legislation.
A Japanese spokesman, however, reiterated Japan's policy that any joint economic activity should not infringe on Tokyo's legal stance, underscoring a remaining gap.
Mr Abe has hoped the lure of economic cooperation for Russia's economy, hit by low oil prices and Western sanctions, would pave the path for progress.
The Japanese leader has pledged to resolve the territorial dispute, in hopes of leaving a diplomatic legacy and building better ties with Russia to counter a rising China.
Mr Putin, however, does not want to tarnish his domestic image as a staunch defender of Russian sovereignty.
Japan has long insisted its sovereignty over all four islands be confirmed before a peace treaty is signed, but has recently been rethinking that stance.