The comments come despite a rightward shift in a cabinet reshuffle Monday, in which Prime Minister Junichiro Koizumi placed outspoken hawk Taro Aso in the foreign ministry.

"Some people advocate a hardline stance, but I doubt whether it is good for the two countries to confront each other by stressing their national interests," Nikai, the Minister for Economy, Trade and Industry, told Japanese media.

"It is important for us to use both hard and soft approaches to solve the issue and find a point where the interests of both the countries can be met," said Nikai, who has personal friendships in China.

Beijing and Tokyo have been sparring for years over the potentially lucrative gas fields in an area where their 200-nautical-mile exclusive economic zones overlap.

The Japanese side proposed joint gas and oil development in the area straddling both sides of what Tokyo says is the maritime boundary.

China, however, does not recognize the boundary and has started digging.

"Now the ball is on the Chinese side, as we wait for the country's response to our offer," Nikai said. "I believe China is a country moving with a longer time span, so we also have to take time in our negotiations."

The comments marked a change in tone from Nikai's predecessor Shoichi Nakagawa, who was appointed farm minister in Monday's reshuffle.

Nakagawa had repeatedly made strong protests against China's gas projects and granted test-drilling rights in the disputed area to a Japanese oil firm.

China has said relations with Japan are at their worst since diplomatic relations were established 30 years ago, due to the energy dispute and Beijing's perception that Japan has not atoned enough for its wartime past.

However, trade has been booming with China last year becoming Japan's largest commercial partner.