Japan releases China fishing boat captain - report

TOKYO (Reuters) - Japan on Saturday released a Chinese trawler captain at the centre of a fierce row that has threatened ties between Asia's two biggest economies, Kyodo news agency reported.

The agency said earlier that the captain would return to China later on Saturday.

A prosecutor from Naha city on Japan's southern Okinawa island said on Friday that the decision to release the Chinese captain, whose trawler collided this month with two Japanese patrol boats in waters near islands both sides claim, reflected consideration for Sino-Japanese ties.

The release follows the detention of four Japanese nationals who are being investigated on suspicion of violating Chinese law regarding the protection of military facilities, although Sengoku denied a link between the two matters.

The dispute over the Chinese trawler has its roots in a long-standing disagreement over sovereignty in an area with potentially rich resources, but has also underscored the fragility of ties long plagued by disputes over wartime history and regional rivalry.

China and Japan both claim sovereignty over the uninhabited islets in the East China Sea -- called the Diaoyu in China and the Senkaku in Japan. They are also at odds over China's exploration for natural gas in the East China Sea.

Beijing is also involved in territorial rows with southeast Asian nations in the South China Sea.

Late on Friday Kyodo quoted a Japanese national resources and energy agency official as saying it was highly possible that China had started drilling in the disputed waters of the East China Sea. But the report also cited a foreign ministry official as saying there was no confirmation.

Worries have grown that a prolonged dispute could hurt economic ties between the world's second and third largest economies, now in the process of swapping places as China overtakes Japan in the No.2 spot.

Japan's sluggish economy has become increasingly reliant on China's dynamism for growth. China became Japan's biggest trading partner in 2009 and bilateral trade reached 12.6 trillion yen (94.2 billion pounds) in January-June this year, a jump of 34.5 percent over the same time last year, Japanese data shows.

In a sign the row was escalating, China cancelled diplomatic meetings and student visits.

Concerns have also simmered that Beijing was holding back shipments of rare earth minerals vital for electronics and auto parts to put pressure on Japan.

($1=85.15 Yen)

(Additional reporting by Yoko Nishikawa, Editing by Linda Sieg and Tim Pearce)