It would be the first time Tokyo has asked Seoul to go to the ICJ for five decades, and the first since ties with its one-time colony were normalised.

The news came as Japan also said it was reviewing a currency swap deal with South Korea and cancelling a high-level visit.

Ties went into virtual freefall when South Korean President Lee Myung-Bak last week visited the Seoul-controlled islands known in Japan as Takeshima and in Korean as Dokdo in the Sea of Japan (East Sea).

His comments earlier this week that Emperor Akihito must apologise for Japan's warmongering past if he wanted to visit South Korea also caused anger.

"Aiming to resolve the issue calmly, fairly and peacefully, we will propose to take this issue to the International Court of Justice," Japan's Chief Cabinet Secretary Osamu Fujimura told a news conference.

"If South Korea believes its claim to Takeshima is justifiable, we strongly hope it would accept our government's proposals," he said.

Foreign Minister Koichiro Gemba later delivered the proposal to South Korean ambassador to Japan Shin Kak-Soo during a meeting in Tokyo.

However, Japan may find it difficult to bring the island issue to the ICJ, which requires agreement between the disputing parties for it to consider claims, or for one party to sue the other.

The Hague-based court is the main judicial body of the United Nations. In Seoul, a senior South Korean government official immediately denounced the plan.

"We won't agree to bring what is ours to be determined by an international court," he said. South Korea rejected proposals by Japan in 1954 and 1962 to let the court rule on the subject.

Japan and South Korea normalised ties in 1965, two decades after Japan's surrender at the end of World War II, an event that also marked the end of Japan's 35-year colonisation of the Korean peninsula.

As part of Japan's protest against Lee's visit to the islands, Japanese Finance Minister Jun Azumi announced he was cancelling a planned trip to South Korea and suggested reviewing a bilateral currency swap deal.

"We must not overlook (Lee's) remarks that utterly lack due respect and rub the Japanese public sentiment the wrong way," he told a press conference.

"It is difficult to completely separate" economic issues from the political dispute, Azumi said. "I felt the timing of my visit to South Korea is not appropriate."

Under the current currency swap deal, the two nations can exchange up to 70 billion dollars worth of US dollars, South Korean won and Japanese yen, a scheme designed to prevent financial crisis.

Azumi said "every option" needed to be considered in deciding whether to extend the level of the swap agreement.