SEOUL (AFP) - An association of South Korea shopowners on Monday urged millions of its members to boycott Japanese goods in protest at Japan's continued claim to a tiny set of islets at the heart of a decades-old dispute.

The Small Local Sales Alliance called on its members, including neighbourhood mini-marts, restaurants, pubs, and other stores, to stop selling Japanese goods including cigarettes, liquor and beer, its spokesman told AFP.

"We launched the action in protest at Japan's ridiculous claim over our Dokdo islands," the spokesman said, referring to the South Korea-controlled islets in the East Sea (Sea of Japan) that are known as Takeshima in Japan.

The alliance claims a membership numbering in the millions.

Japan held an annual rally last week to promote its claim to the island chain. Hundreds of people attended, including the highest-ranking Japanese government official ever dispatched to the event.

South Korea, which had urged Tokyo to cancel Friday's rally, reacted angrily and hundreds of activists staged a protest outside the Japanese embassy in Seoul.

"Our group is comprised of countless smaller and close-knit neighbourhood chapters, so the impact can be significant if many agree to take part," the alliance spokesman said.

Mom-and-pop stores account for a large volume of Japanese consumer product sales, particularly cigarette brands like Mild Seven and Asahi beer.

Relations between South Korea and Japan have regularly been strained by the territorial dispute and other contentious issues arising from Japan's 1910-45 colonial rule over the Korean peninsula.

The territorial row deepened last year following a surprise visit by South Korean President Lee Myung Bak to the island chain.

Japan is embroiled in separate territorial rows with China and Russia.