Diplomatic tensions remain high between the two countries, despite Capt. Zhan Qixiong being released by Japanese police.

He was being held on Okinawa Island but has been returned to China. Earlier this month Japan released the 14 crew members of the boat and the vessel was sailed back to China.

The Japanese coast guard arrested Zhan, 41, on Sept. 8 after he allegedly rammed the Japanese vessels, causing minor damages, in the East China Sea.

The Japanese vessels were trying to stop the trawler Minjinyu 5179 in waters considered Japanese, around the disputed Senkaku Islands -- also known as the Diaoyu Islands.

The event has had a bruising effect on relations between the two economic Asian giants by highlighting the importance for Beijing and Tokyo to settle ownership of the islands, which are also claimed by nearby Taiwan.

The islands lie 106 miles north of Japan's Ishigaki Island and 200 miles from the Chinese mainland. They are also 116 miles northeast of Keelung on northern Taiwan.

A statement by Chinese foreign ministry reiterated its "strong protest" over the arrest and China's "indisputable" claim to the islands. "The Japanese side must make an apology and compensation for this incident," the ministry statement said.

However, Japanese foreign ministry officials called China's demand for an apology over the arrest as "totally groundless."

Japanese Prime Minister Naoto Kan, who was in New York at the U.N. General Assembly, was more conciliatory in his statement to the press, saying the release was done also to ensure continued "mutually beneficial" ties with China.

"Prosecutors came to their judgment in compliance with their duty on the basis of Japanese domestic law," Kan said. "In any case, China and Japan are important neighbors."

Even though Zhan is safely back in China, the incident has shown that a major diplomatic fault-line in Sino-Japanese relations lies along the disputed island chain. At stake isn't so much the territory of the uninhabited rocky outcrops -- less than 3 square miles in total -- but the seabed natural resources, especially natural gas fields in the area.

Last week, U.S. Secretary of State Hillary Clinton urged both sides to settle the issue and not let it further disrupt relations that could negatively affect the longer term peace and cooperation in the region.

U.S. interest in the dispute is derived from a treaty with Japan dating to 1960. Under the security treaty, the United States is obliged to defend Japan against any attack on a territory under Tokyo's administration, which includes the Senkaku Islands.

At the end of the World War II, the islands were under U.S. jurisdiction as part of the captured island of Okinawa. But they have been under Japanese jurisdiction since 1972 when Okinawa was returned to Japan, which controls them and the waters around them.

Clinton reportedly told Japanese Foreign Minister Seiji Maehara while in New York that the islands are covered by the Japan-U.S. security treaty.

State Department spokesman Philip Crowley appeared to confirm the U.S. stance on the islands.

"We do believe that, because the Senkaku Islands are under Japanese jurisdiction, that it is covered by the U.S.-Japan security treaty," he said. "That said, we also stressed that we don't take a position on the sovereignty of the Senkaku islands."

Within China there has been a marked number of public demonstrations and Web site discussion groups calling for the islands to be handed over to China.

Zhan, too, has been defiant over his arrest. After landing at Fuzhou Airport in Fujian Province, he said he did nothing wrong and was fishing in Chinese waters around Chinese islands.

"The Diaoyu Islands are a part of China. I went there to fish. That's legal," Zhan said.

"Those people grabbed me. That was illegal."

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