Russian President Vladimir Putin has declared that his country will offer tax breaks to attract Japanese and other foreign investors to Russian-controlled islands claimed by Japan.
Putin addressed an international economic forum held in Vladivostok in the Russian Far East on Friday.
He said companies that do business on the islands will be exempted from key taxes for 10 years. He added that the area would also become a tariff-free zone.
Russian Prime Minister Mikhail Mishustin proposed setting up such a zone during a visit in July to Etorofu, one of the four Japanese-claimed islands.
Japan and Russia have long been negotiating specific ways to carry out joint economic activities on the islands, which Japan calls the Northern Territories.
The Japanese government maintains that the islands are an inherent part of Japan's territory. It says the islands were illegally occupied after World War Two.