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Slideshow Japan hints at economic action in South Korea island feud Tweet Share this Email Print Related News Japan says disputed islands should not hurt key China ties Mon, Aug 20 2012 Landings, protests stoke Japan-China islands dispute Sun, Aug 19 2012 UPDATE 5-Landings, protests stoke Japan-China islands dispute Sun, Aug 19 2012 Exclusive: White House studying potential oil reserve release Fri, Aug 17 2012 Japan sends back Chinese activists in bid to defuse island row Fri, Aug 17 2012 Analysis & Opinion Essential reading: Indigestion for the French in a plan for higher taxes, and more Next Week: “Put” in place? Related Topics World » Japan » South Korea » Japan's Finance Minister Jun Azumi scratches his head during a news conference after the 15th ASEAN plus 3 Finance Ministers and Central Bank Governors' meeting in Manila May 3, 2012. Credit: Reuters/Romeo Ranoco TOKYO | Tue Aug 21, 2012 2:42am EDT TOKYO (Reuters) - Japan said on Tuesday it was considering taking measures beyond diplomatic action in its feud with South Korea over a group of disputed islands, suggesting Tokyo may take the unusual step of extending the stand-off into the economic arena. Finance Minister Jun Azumi suggested last Friday that Japan could roll back an emergency currency swap arrangement agreed last year and expiring in October. Japanese media has also speculated that Tokyo could abort a plan to buy South Korean government bonds, a step agreed as part of financial and economic cooperation between the two countries. Japan's cabinet on Tuesday held a meeting to discuss a response to what Japan considered a provocative visit of South Korea's president to disputed islands earlier this month. Chief Cabinet Secretary Osamu Fujimura said Prime Minister Yoshihiko Noda told his cabinet to consider additional measures to deal with the conflict, beyond usual diplomatic channels. "Prime Minister Noda instructed ministers to prepare peaceful solution in accordance with an international law, strengthen information policy ... and consider possible additional measures," Fujimura told reporters. Azumi would not comment on the swap deal on Tuesday and other ministers said the issue was not even discussed. The islands, known as Dokdo in Korea and Takeshima in Japan, lie equidistant from the two mainlands and are believed to contain frozen natural gas deposits potentially worth billions of dollars. Japan recalled its ambassador to South Korea after Lee became the first South Korean leader to set foot on the islands. Azumi last week called off his trip to Seoul scheduled for this week and the government postponed two other ministerial-level meetings between the two countries originally planned for the end of the month. Tokyo has said it will take the long-running islands territorial dispute to the International Court of Justice. But it would be unusual for Japan to play the economic card in disputes with its neighbors. "They are talking about it but I am not sure they will carry through the threats. Talk is cheap," said Koichi Nakano, Sophia University professor and political commentator. Japan's ruling Democrats, under voter pressure and likely to lose the next election, seemed to have over reacted to media criticism that they were too soft in disputes with Japan's neighbors, said Nakano. The spat with South Korea coincides with a stand-off between Japan and China over another island chain, which sparked major anti-Japanese protests in China last week. Tokyo has stressed the dispute with Beijing over the islands, known as the Senkaku in Japan and the Diaoyu in China, should not hurt ties between Asia's two biggest economies. Despite ever-closer economic ties, memories of Japanese militarism run deep in China and South Korea and overlap with present day rivalry over markets, economic and diplomatic influence and natural resources. (Reporting by Kaori Kaneko; Writing by Tomasz Janowski; Editing by Michael Perry) World Japan South Korea Tweet this Link this Share this Digg this Email Reprints We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. 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