Japanese Prime Minister Junichiro Koizumi said Thursday that Japan and China should solve the oil and gas drilling dispute in the East China Sea through dialogue.

The remarks were made one day after Tokyo granted Japanese firms the right to drill for gas and oil in the East China Sea.

"The Chinese and Japanese positions differ on that matter, but we need to continue talks from a big point of view, without inflaming conflicts, and to turn the sea of conflict into a sea of coordination," Kyodo News quoted Koizumi as saying.

The Japanese government on Wednesday initiated procedures to grant Japanese firms the right to conduct test drilling for potential gas and oil fields to the east of the so-called " demarcation line" in the East China Sea.

Following Japan's announcement on Wednesday, the Chinese Foreign Ministry said the move was a provocation to China's rights and the norm of international relations

Chinese Foreign Ministry spokesman Qin Gang said China had already lodged protest on this issue to the Japanese side and will retain the right to make further reaction.

"China has never ever recognized and will never recognize the " demarcation line," Qin said.