Efforts to resolve the 21-month-old impasse are at a delicate stage where real negotiations were beginning, Roh told a press conference after the 90-minute summit with the Japanese leader at this holiday resort island off South Korea's southern coast.

Roh remained upbeat, citing concrete proposals which were exchanged at the third round of six-way talks held in Beijing in June that brought together China, both Koreas, Japan, Russia and the United States. Though no breakthrough was achieved, new talks are set for September.

"I hopefully expect rapid progress to be made at the next round of six-way talks in September," he said.

"We two leaders appreciate that the negotiations aimed at resolving the nuclear issue enter a stage for substantial negotiations with concrete proposals put forward at the third round of six-way talks."

Both leaders said North Korea would stand to benefit significantly from scrapping its nuclear weapons drive, with Roh holding out the prospect of rapid economic cooperation to rescue the Stalinist state's moribund economy and Koizumi offering the possibility of normalized diplomatic relations within two years.

"I want to achieve (normalization) within two years if possible and maybe one year if that can be done," said Koizumi.

"We are in a position to normalize relations anytime after North Korea faithfully implements the Pyongyang declaration."

He was referring to a joint statement issued in September 2002 on improving bilateral ties when he visited North Korean leader Kim Jong-Il in Pyongyang.

However, issues including North Korea's admitted kidnapping of Japanese citizens in the 1970s and 1980s to train spies and Pyongyang's missile threat directed at Japan must be cleared up before diplomatic relations could be established, Koizumi added.

He said Japan would also work with South Korea and the United States to press North Korea to "completely dismantle its nuclear programmes".

The stand-off erupted in October 2002 when the United States accused Pyongyang of operating a nuclear weapons programme based on enriched uranium, violating the 1994 nuclear freeze of its separate plutonium-producing programme.

Roh and Koizumi also pledged to boost bilateral ties ahead of next year's 40th anniversary of the establishment of relations between the two nations with a history of tension and mutual suspicion.

They said they would work towards establishing a free-trade agreement and work to draft an extradition treaty.

Japan occupied Korea from 1910-45 and Koreans still harbour resentment about Tokyo's harsh colonial rule.

Fricton has also surfaced about Koizumi's visits to a shrine honouring Japan's war dead, including convicted war criminals and Japanese claims to an island in the sea between the two nations that Koreans say is their territory.

WAR.WIRE