- China-Japan tensions over the islands have rumbled on for months
- Reported purchase comes less than a month after Chinese protesters took to the streets, overturning Japanese cars
It is understood to have paid 2.05billion yen ($26million) to the Japanese Kurihara family for three of the five Senkaku islands, which are known as the Diaoyu group in Chinese.
The move would effectively nationalise them and stop China from buying the chain, which lie 200 miles from the Chinese mainland and 200 miles from Japan's Okinawa.
It follows months of rising diplomatic tension between the two countries over which has sovereignty over them.
The oil-rich islands in the East China sea have been heavily disputed by China and Japan
Tensions over the islands have flared since April, when Tokyo's nationalist governor, Shintaro Ishihara, announced a plan for the city government to raise money to buy the islands so that they would not be vulnerable to purchase by a third party such as China.
A Japanese government official declined to confirm the deal after it was reported by the Kyodo News agency and the Yomiuri and Asahi newspapers. He and said negotiations were continuing.
Tokyo Mayor Shintaro Ishihara talks to the media after reports China had purchased the islands
China responded by calling the reported purchase 'illegal and invalid.'
Foreign Ministry spokesman Hong Lei said: 'For them to nationalize the Diaoyu islands seriously violates China's sovereignty and hurts the Chinese people's feelings.
'I stress again that any of their unilateral acts with the Diaoyu islands are illegal and invalid.
'China's determination will not change in terms of safeguarding its territory. China is observing the situation and will take necessary measures to defend its sovereignty.'
While the move would clearly anger China, media reports said that the purchase is intended more as a means of squelching Ishihara's more inflammatory proposal, which includes development plans. The islands are near key sea lanes and surrounded by rich fishing grounds and untapped natural resources.
No development would take place under the national plan, the reports said.
The media reports said funding for the purchase would require Cabinet approval, something likely to happen in the next week or two. They said the final deal could be closed by the end of the month.
Chief Cabinet Secretary Osamu Fujimura said the government and owner are still talking and he would not comment on details about the discussion.
He said the government would make an announcement 'when we reach a result after completing the process.'
Ishihara said he had spoken to the owners of the islands and claimed they told him that no final deal had been made yet.
Rising tensions: Protesters in Hangzhou, China,
hold placards and banners at a demonstration against Japan's claim of
the disputed islands last month
Land grab: The protests in China came after
Japanese activists swam to the islands and raised their national flag on
the disputed territory
Disputed: A Japanese activist waves the
country's flag after landing on a group of islands known as Senkaku in
Japanese and Diaoyu in Chinese
They said, however, that the government was dealing directly with Ishihara, and said they did not know the context of those talks.
Government representatives met with Kurihara family members on Monday and agreed on the basic terms of the sale, the reports said.
The dispute over the islands grabbed headlines after a Sept. 7, 2010, incident in which a Chinese fishing boat collided with Japanese coast guard ships near the islands. The Chinese fishing boat captain was arrested and then released.
The dispute had been on the back burner as Japan struggled to recover from last March's devastating earthquake, tsunami and nuclear disaster.
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