Prime Minister Junichiro Koizumi on Tuesday rejected a suggestion by Russian President Vladimir Putin that the dispute over the Northern Territories be settled with the return of two of the four islands.

``The return of two islands is taken for granted, but that alone will not be satisfactory to Japan,'' Koizumi said. ``A peace treaty cannot be concluded until after it is made clear to whom the four islands belong.''

Koizumi stuck to Japan's stance that Moscow must return all four islands off Hokkaido seized by Soviet forces at the end of World War II.

Putin told a Cabinet meeting in Moscow on Monday that Russia ``is ready to fulfill obligations stated in a ratified document.''

Putin's comment apparently underscores his firm resolve that the territorial dispute be settled with the handover of two of the islands in line with the Japan-Soviet Joint Declaration of 1956.

The declaration confirmed the Habomai group of islets and Shikotan island would be returned after the two countries conclude a peace treaty.

Noting that the 1956 agreement had not been carried out, Putin said there is a ``gap in understanding'' between Russia and Japan, indicating the most Moscow could offer is to turn over the two islands.

Putin's words were also seen as an offer of compromise, considering the staunch opposition among Russians against returning any of the islands.

Japan, on the other hand, claims sovereignty over all four islands, including Kunashiri and Etorofu.

In a 1993 declaration, then Prime Minister Morihiro Hosokawa agreed with Putin's predecessor, Boris Yeltsin, that the two nations would conclude a peace treaty after sorting out the question over the title of the four disputed islands.

On Tuesday, Koizumi made clear Japan will stick to the principle, as well as the government's position that it will be flexible over the timing of the reversion if Japan's sovereignty over all four islands is confirmed.

The tough stances taken by Koizumi and Putin will likely make it difficult for the two sides to hammer out a path to a solution before the Russian leader's scheduled visit to Japan early next year.

Putin first acknowledged the effectiveness of the 1956 declaration in a 2000 summit with then Prime Minister Yoshiro Mori.

Putin will also meet Koizumi on the sidelines of the Asia-Pacific Economic Cooperation summit in Chile.(IHT/Asahi: November 17,2004)