The two countries are in dispute over a chain of Pacific islands and as a result have still not formally ended WWII. Moscow suggested a treaty without preconditions. But Tokyo later said it still wants the islands back first.
Russian President Vladimir Putin, sitting on a stage alongside Japanese Prime Minister Shinzo Abe, proposed on Wednesday that the two leaders sign by the end of this year a peace treaty without preconditions to formally end World War Two.
The apparently unscripted remarks came at the Eastern Economic Forum, also being attended by China's President Xi Jinping, in far eastern Russia's Vladivostok.
"An idea has just come into my head," Putin said, turning towards Abe during a question and answer session.
"Let's conclude a peace treaty before the end of this year, without any pre-conditions."
The two countries are in dispute over a chain of Pacific islands and as a result have still not formally ended their WWII hostilities.
Abe did not immediately respond to Putin's proposal. However, a government spokesman later said Japan still insists on the return of the islands ceded to the Soviet Union at the end of the war, before it signs a peace treaty.
The islands are known as the Kuriles in Russia and the Northern Territories in Japan.
"I don't want to comment on what President Putin said," Japan's Chief Cabinet Secretary Yoshihide Suga said at a regular briefing in Tokyo.
"However, our position that the Northern Territories issue is resolved before any peace treaty remains unchanged."
Abe and China's Xi Jinping looking at reciprocal visits
In his speech before Putin's, Abe said Japan and China had agreed to work towards an October visit by him to China, the latest sign of warming ties between the Asian rivals.
Abe also said he and Chinese President Xi Jinping shared the view that Japan and China bore responsibility for world peace and prosperity, as well as the goal of achieving North Korea's denuclearisation.
Abe returned to office for a second term in December 2012, promising a tough line towards China in a territorial row over tiny islands in the East China Sea.
Although the dispute is unresolved and still simmers, relations have stabilised recently amid intensifying US trade pressure on both China and Japan.
"In response to China’s gracious invitation, I intend to visit China this year, the year in which we commemorate the 40th anniversary of the conclusion of the Treaty of Peace and Friendship between Japan and China," Abe said.
"After that, I very much wish to invite President Xi to Japan. Through this exchange of visits at the leaders' level, I hope to raise Japan-China relations to a new stage."
Japanese media have floated October 23, the date on which the treaty took effect, as the likely timing of Abe's visit.
Xi told Abe that Sino-Japanese ties "face an important opportunity for improvement. Under the new circumstances, we should continue to meet each other halfway, maintain the positive momentum and promote the stable development of China-Japan relations to attain even greater expansion [of ties],” according to a statement by the Chinese foreign ministry.
Japanese and Chinese officials have been discussing private sector co-operation in third countries, with China believed eager for Japanese firms to take part in its Belt and Road Initiative of infrastructure and trade links between China and Eurasia.
De-nuclearisation of the Korean peninsula also discussed
Abe also told the regional forum he hoped North Korea would seize the opportunity to improve ties with the international community but it was "an absolute imperative that we achieve the complete denuclearisation of the Korean peninsula."
The White House is looking at scheduling a second meeting between US President Donald Trump with North Korean leader Kim Jong-un following their first summit in Singapore in June.
Abe reiterated his desire to meet Kim himself to resolve the matter of Japanese citizens kidnapped by Pyongyang's agents decades ago, but said nothing had been decided yet.
Abe said it had been bold of Trump to hold a summit with Kim, and that he had high hopes for an upcoming inter-Korean summit in Pyongyang.