Japanese authorities have said they would free the detained captain of a Chinese fishing vessel, who has been at the centre of a major diplomatic spat between the two countries, Japanese media reported on Friday.

Japan's Kyodo news service reported on Friday that prosecutors on Ishigaki island, where Chinese ship captain Zhan Qixiong has been detained since September 8, had announced they would release him “in consideration of the Japan-China relationship”.

Japanese authorities had accused Mr. Zhan of ramming his fishing trawler against two Japanese patrol vessels near disputed territory between the neighbours in the East China Sea, known as the Diaoyu Islands in China or the Senkaku islands in Japan.

Prosecutors had earlier set a September 29 deadline for charging Mr. Zhan. However, tensions between the two countries have spiked in recent days over the row, with Chinese leaders threatening retaliatory measures and demanding the unconditional release of the captain.

The announcement of his release comes a day after China detained four Japanese nationals, accusing them of entering a military zone without authorisation and videotaping military facilities in northern Hebei province. “Currently, the case is being investigated,” said security authorities in Hebei's capital Shijiazhuang, in a statement issued to the official Xinhua news agency.

News reports on Thursday also said Chinese customs officials had halted exports to Japan of rare earth minerals, which are crucial to several high-tech industries from electronic equipment to missile technology. China accounts for 97 per cent of global production of rare earths, and Japan is a major destination for Chinese exports.

Chinese officials have, however, denied any ban was in place. A ban on exports would violate World Trade Organisation (WTO) rules.

Japanese politicians this week voiced concerns on the economic impact of the souring diplomatic ties between the two countries. “A cooling of relations between Japan and China over the Senkaku problem would be bad for Japan's economy, but it would also be a minus for China,” said Finance Minister Yoshihiko Noda. “It is desirable that both sides respond in a calm manner.”

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