Japan, taking a more flexible stance on ties with Russia, favors extending some large-scale aid to its needy neighbor, the Foreign Ministry's spokesman said on April 21.

Spokesman Masamichi Hanabusa said Tokyo had relaxed its long-standing policy ruling out any large-scale aid for Moscow until it returned a cluster of north Pacific islands seized by Soviet troops in the closing days of World War II.

"We have already indicated to the Russian Federation that we are preparing $2.5 billion in various forms of assistance," he said. Japan also supported a $24-billion Western package for Russia announced in early April, he said.

Foreign Minister Michio Watanabe said April 18 Japan was ready to ease its demands and accept a phased return of the islands - the two smallest ones first in return for a promise by Russia to return the larger two at a later date.

Until now, Japan had demanded the return of all islands together as a condition for concluding a peace treaty and resuming full bilateral ties.

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