Kaifu Urges Gorbachev to Concede Japan’s Sovereignty Over 4 Islands : Summit: The Soviet leader, in turn, calls for an end to the ‘Cold War’ in Tokyo-Moscow relations.

Cutting promptly to the heart of Japan’s 45-year-old dispute with Moscow, Prime Minister Toshiki Kaifu on Tuesday called for visiting Soviet President Mikhail S. Gorbachev to make a bold “political decision” that would recognize Japanese sovereignty over four contested islands.

As Gorbachev, who arrived in Tokyo earlier in the day, met in the first of three scheduled talks with Kaifu, Japanese government officials were reportedly assembling a loan and investment aid package that would reward any significant change in the Soviet Union’s position.

Sources said the package prepared by Kaifu’s government centers on extending a $450-million loan to help Moscow pay off an equivalent sum in debts that it owes Japanese firms. It would also introduce government-guaranteed insurance to help spur Japanese investment in the reeling and shortage-plagued Soviet economy, they added.

According to the Japanese officials, Kaifu will decide whether to offer the aid package after his negotiations with Gorbachev come to an end.

Gorbachev flew into Tokyo on Tuesday morning for a four-day stay that made him the first Kremlin leader in history to visit Japan. By mutual consent, details of the Kaifu-Gorbachev talks were not divulged because of the high degree of controversy aroused by the territorial dispute.

At issue are four small, desolate islands off Japan’s northernmost island of Hokkaido that the Soviet Union seized at the close of World War II and that Japan says rightly belong to it. The feud, which dates to 1945, has blocked the total normalization of Japanese-Soviet relations.

Despite the media blackout clamped on the negotiations, Japanese officials said Kaifu told Gorbachev during their three-hour meeting that “the atmosphere has come for the leaders of the two countries to make a political decision.”

In his turn, Gorbachev reportedly made an emotional plea for a drastic improvement in economic and political relations between Japan and the Soviet Union, the world’s No. 2 and No. 3 economic powers respectively.

“The Cold War has become an anachronism in the world, but it is still there in Soviet-Japanese relations,” a senior Japanese Foreign Ministry official quoted Gorbachev as saying. “The Soviet people think ties must be improved with Japan, and we must not miss this chance.”

Gorbachev’s spokesman, Vitaly N. Ignatenko, said the leaders would resume their negotiations today earlier than scheduled. Both sides have said a fourth round of talks could be added to the agenda if necessary.

In a sign of the keenness of the territorial dispute, about 2,500 Japanese rightists rallied at downtown Tokyo’s Hibiya Park in balmy spring weather and marched through the city center to demand the restitution of the islands, which Japan calls its “Northern Territories,” part of what is generally known as the Kuril chain. Organizers claimed it was the biggest rally by right-wing groups since World War II.

In another overture to public opinion here, Gorbachev on Tuesday evening expressed “condolences” to the families of an estimated 10,000 Japanese prisoners of war who died in Siberian captivity. Some were kept for as long as a decade, even though World War II hostilities between the countries lasted less than a week.

To help heal the scars, one of 15 bilateral agreements drawn up for signature by Gorbachev and Kaifu requires Moscow to furnish the names of all Japanese interned in the Soviet Union, both those who survived and those who died. The number of POWs is believed to total 600,000.

Gorbachev’s conciliatory remarks on the prisoners, made at a state dinner held in his honor, were carried on Japanese TV news broadcasts. Gorbachev also invited his official host, Emperor Akihito, to come to Moscow. No Japanese monarch has ever visited the Soviet Union, its former Warsaw Pact allies or any other Communist country, from China to Cuba.

Gorbachev’s wife, Raisa, spent her afternoon in Tokyo’s chic and glittering Ginza district, where, to the consternation of bodyguards, she dashed into the crosswalk in front of the Mitsukoshi Department Store to shake hands with well-wishers.

At the Kabuki-za theater, where performances are given of the all-male classical form of Japanese drama called Kabuki, Raisa Gorbachev watched an act of the play “Images of Five Days at the Sumida River,” but she was the main showstopper herself.

As the Soviet First Lady, wearing a bright emerald suit with black trim, entered the theater, people packed a second-floor balcony to applaud. They clapped again once she had settled into her fifth-row seat.

Gorbachev’s wife, who is resented by many of her compatriots for her fancy clothes and her VIP lifestyle, carefully avoided anything that could smack of lavish living at a time when many Soviets are having problems finding adequate groceries in state-run stores.

Chatting with women bakery workers near the celebrated Tsukiji fish market, Raisa Gorbachev wanted to know about working conditions and child care.

The Soviet leader also made a crowd plunge of his own in the evening, surprising his police escort. While zooming through Tokyo in his massive black Zil limousine, he ordered his driver to stop at an intersection and emerged beaming to pump the hands of about 50 Japanese.

In what is expected to be a centerpiece of his Tokyo visit, Gorbachev today will deliver an address to the Japanese Parliament that will propose a Soviet blueprint for security and confidence-building measures in Asia.

According to a draft copy of the speech leaked to journalists in Tokyo, Gorbachev will call for a five-nation Asia-Pacific Security Conference, to be attended by China, Japan, India, the Soviet Union and the United States.

He also will reiterate a Soviet proposal to convene a meeting of the foreign ministers of all countries in Asia and the Pacific in 1993, a step mimicking the European meetings that led to the 1975 Helsinki Conference and last year’s European summit in Paris.

According to the draft, Gorbachev will announce that the Soviet Union intends to reduce its military presence in Asia and the Pacific. The draft says Kremlin arms cuts will even be deeper if the United States and Japan reduce their naval armaments as well.