Chinese President Hu Jintao (
Relations between the Asian powers have been soured by Koizumi's visits to Tokyo's Yasukuni Shrine.
The trips have prevented state visits by either leader to the other's country for the past three years.
Hu said "in very explicit terms that the crux of the problem is that Japanese government leaders pay homage to the Yasukuni Shrine," according to Chinese foreign ministry spokesman Kong Quan (
The Japanese and Chinese leaders met after a two-day summit of APEC leaders in the Chilean capital of Santiago.
"He said that Japanese leaders should seek a proper solution to this matter by taking history as a mirror and looking into the future."
Hu particularly called on Koizumi to suspend his visit to the shrine next year "as we will have a sensitive year, which marks the 60th anniversary of the victory of anti-fascism."
Koizumi replied he would "sincerely" receive Hu's remarks but stopped short of mentioning any possibility of suspending his pilgrimage next year.
"I visit there in order to honor those who lost their lives against their will," Koizumi explained.
The heated debate on the war history extended the length of talks to over an hour from an originally scheduled 30 minutes.
China, occupied by Japan before and during World War II, has voiced outrage over Koizumi's regular pilgrimages to the shrine, which honors the Japanese war dead including convicted war criminals.
Japanese atrocities serve as nationalistic fodder in Chinese state propaganda. Japanese footballers were loudly booed and jeered in China this summer when they played and ultimately won the Asian Cup.
In a bid to turn the tables, Koizumi raised with Hu the matter of a Chinese nuclear submarine's intrusion into Japanese waters this month, which put a new strain on the Asian powers' relations.
"It is important to prevent any recurrence of such an incident in the future," Koizumi told Hu, according to a Japanese government official.
But Hu made no reply over the intrusion, which involved a two-day chase on the high seas near gas fields disputed between China and Japan in the East China Sea.
A Chinese spokesman, declining to elaborate, said: "The submarine issue was already appropriately resolved through the foreign ministries."
Japanese officials last week said China had apologized for the intrusion of the nuclear submarine, which Beijing blamed on a technical error. Japan is also irked by a Chinese sea-bed research project in what Tokyo considers its exclusive economic zone there.
"It is important for us to take apt measures on natural resource development," Koizumi said, adding that the two countries should not "turn the East China Sea to a conflicting sea."
A sense of political self-confidence and nationalism is growing in both countries despite close trade relations.
Japanese business leaders have pressed Koizumi to smooth over relations with China, to which Japan's exports surged 24.1 percent to ?3.8 trillion (US$37 billion) for the six months to June.
During the China-Japan summit, Hu and Koizumi at least agreed to urge North Korea to buckle on negotiations for an end to a crisis over its nuclear weapons program, often described as a major threat to Asian security.
"The issue should be solved peacefully though dialogue," Hu said, pledging to continue persuading North Korea to return to stalled multilateral talks over the crisis. Beijing has traditionally friendly ties with Pyongyang.
Three rounds of multilateral talks, seeking to urge North Korea to take aid and security guarantees in return for mothballing the nuclear program, have taken place since the stand-off erupted in October 2002.
North Korea boycotted a fourth round of talks in September.
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