Japanese Prime Minister Yasuo Fukuda joined Russia's leaders on Saturday in praising improved ties and pledging to further negotiations over the disputed Kuril Islands.
President Vladimir Putin, due to become prime minister after leaving the Kremlin on May 7, told Fukuda at a presidential residence outside Moscow that relations had substantially improved.
"In the last two or three years we managed to change our relations in a qualitative manner," Putin said.
Fukuda, who went on to meet with Putin's newly-elected successor Dmitry Medvedev, also said that "cooperation is developing" ahead of July's Group of Eight (G8) summit in Japan.
Topping the agenda were energy projects, trade, the G8 talks, and a six-decades-old dispute over the Kuril Islands, known as the Northern Territories in Japan.
Japan and Russia have never signed a peace treaty formally ending World War II due to Tokyo's claim to the four islands off its northern coast that were seized by Soviet troops in 1945 and are now controlled by Russia.
Putin signalled goodwill, saying "the dialogue on a peace treaty is continuing and we will create all the necessary conditions for going forward on that path".
"We are perfectly conscious of the fact that many unsolved problems remain and we are all the more happy to see you here and to continue our dialogue," he added.
Fukuda was also hoping the visit, his first to Russia since being elected prime minister last September, would help establish a personal rapport with the incoming Medvedev.
"This meeting is a good chance to get strong personal relations up and running," news agency ITAR-TASS reported Fukuda as saying.
Despite the Kurils dispute, trade soared 65 percent last year to 20.1 billion dollars (13 billion euros), according to Kremlin figures.
Putin said that since 2003, trade volume had increased five-fold.
Putin is expected to maintain influence in foreign affairs as prime minister. However, it will be his successor Medvedev who attends the G8 summit on the Japanese island of Hokkaido, where climate change and food security top the agenda.
Climate change presents "a huge opportunity" for Japan and Russia to become close partners, a Japanese government official told AFP ahead of Fukuda's arrival in Moscow. Japan wants to buy carbon credits from Russia under the Kyoto protocol to offset its greenhouse gas emissions.
Fukuda praised Russia's role in Asia and said it should be expanded.
"There are difficult problems in this region, including the problem of North Korea. We have to get over these problems... and Russia has a major role in this," he was quoted as saying by ITAR-TASS.
By the start of 2009, natural gas from Russia's huge Sakhalin fields will supply 8.5 percent of Japan's imports, and nuclear energy projects are also under discussion.
Japanese investment in Russia reached 3.1 billion dollars last year.
The Russian Space Agency signed a cooperation agreement with a Japanese space research institute last year. Russian and Japanese companies are also working on a joint project to lay fibre-optic cables across Russia to improve data transmission speeds.
Underlining cultural ties between the two countries, Fukuda sat in on a Japanese language performance at a Moscow school Saturday where he was presented with flowers.
