ST. PETERSBURG, Russia -- Japan and Russia vowed on Saturday to reach a peace treaty by the end of the year but sidestepped a thorny territorial issue that has prevented them from formally ending World War II hostilities.

Visiting Japanese Prime Minister Yoshiro Mori and Russian President-elect Vladimir Putin agreed to work toward signing the treaty, reaffirming a commitment made by their predecessors."It is a very important aim for us to secure a peace treaty within the year 2000 as agreed previously," Mori told reporters in Russia's second city of St. Petersburg.

"We reaffirmed our desire to continue negotiations on the peace treaty based on previous . . . declarations."

The two leaders agreed to pursue the tradition of their predecessors by using each other's nicknames -- Yoshi and Volodya. And like in many past meetings between their predecessors, they avoided tackling the territorial row, whose solution is seen as indispensable to any peace treaty.

Japan wants the return of four North Pacific islands seized by Soviet troops in 1945. Fearing a backlash, Moscow says this should be left for future generations.

Previous informal summits had often been characterised by smiles and back-slapping which tended to belie a lack of progress in bridging differences on the territorial issue.

Putin told reporters that the positions of Moscow and Tokyo "on a range of international problems, including the role of the United Nations, overlap to a significant extent."

Putin, Mori discuss G8 summit

Discussions had also focused on preparations for the July 21-23 summit of the Group of Eight Nations on the Japanese island of Okinawa, which Mori is due to chair.

The G8 includes the world's seven leading industrialised nations plus Russia.

The Japanese premier said he would garner support among the G8 for the economic reform measures being implemented by Putin and expressed willingness to lend a hand to Russia's efforts at hosting a G8 summit in 2003.

Mori also invited Putin on an official visit to Japan.

Itar-Tass news agency quoted Putin's press secretary Alexei Gromov as saying the two sides had made a preliminary agreement that the trip would take place at the end of August.

A failure to set the date could have been an embarrassment for the Japanese premier, keen on achieving diplomatic results ahead of a parliamentary election, which is likely in late June.

The talks have enabled the two leaders to cement a relationship favoured already by the deep respect each clearly held for the other's culture and history.

Putin, who met Mori in his home town and Russia's imperial capital, is a black belt in judo and has expressed admiration for many aspects of Japanese culture.

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The burly, rugby-playing Mori has spoken much of his late Russophile father, who insisted some of his ashes be interred on Russian soil after working for many years at the local government level to improve frosty Russo-Japanese ties.

The two also attended the opening of the world ice hockey championship, when Putin asked the huge crowd to welcome Russia's Japanese guest. The crowd gave both leaders a huge round of applause in the gleaming new arena.

This trip is Mori's first abroad since taking the reins this month from the stricken Keizo Obuchi. It is also one of Putin's first ventures into diplomacy since his resounding election victory a month ago. He is to be inaugurated on May 7.

Mori leaves Russia on Sunday. He plans to visit the other G8 countries--Italy, France, Germany, Britain, Canada and the United States, in that order--before returning to Japan.

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