Russian President Boris Yeltsin and Japanese Prime Minister Keizo Obuchi agreed a joint declaration in Moscow calling for a long-term partnership based on trust.

They pledged to sign a peace treaty after a 50 year delay caused by a sovereignty dispute over the Kuril islands - off the northern Japanese coast.

Technically, Russia and Japan have been at war since the islands - known in Japan as the Northern Territories - were seized by the Soviet Union in 1945. They are still claimed by Japan.

"This is an irreversible step," said Russian Prime Minister Yevgeny Primakov after exchanging copies of the signed declaration with his Japanese counterpart.

"It is a big step towards signing a peace agreement," he said. President Yeltsin did not attend the brief ceremony.

The Moscow Declaration provides for two joint bodies to be set up under the umbrella working group which is already thrashing out a peace treaty.

The first body is to study where to draw a border between Russia and Japan, while the second will look at how the two countries can establish "joint economic activities" in the disputed islands.

The declaration was signed before talks between the two prime ministers about Japanese aid and loans to Russia.

The meeting was expected to focus on the details of an $800m instalment of a loan Japan promised last summer.

The rival claims over the Kuril islands have previously marred trade relations between the two countries.

Mr Obuchi's visit to Moscow is the first such trip for 25 years. Mr Yeltsin is scheduled to visit Tokyo next year.

Aid link denied

BBC Moscow Correspondent Paul Anderson says that although the islands represent a minuscule percentage of Russia's land mass, they are seen by nationalists and communists as the legitimate spoils of a war in which millions of Soviet people were killed.

President Boris Yeltsin: Weighing up economic needs and nationalist feelings

The worsening economic crisis has forced Mr Yeltsin to improve relations with Japan to attract aid and exploit untapped trading opportunities.

Japan has put forward concrete proposals on boosting trade and humanitarian and cultural ties.

It has also put together an aid package of $1.5bn with the International Monetary Fund, and suggested that payment of aid might be accelerated.