South Korea has officially protested and demonstrators burned Japanese flags after a Japanese assembly re-ignited a row about a group of disputed islands.
The claim has sparked passionate protests in Seoul
Shimane assembly voted to assert Japan's claim by giving the islands, called Takeshima in Japanese and Dokdo in Korean, a special day.
South Korea's Foreign Minister Ban Ki-moon called the vote "deplorable".
The rocky and uninhabited islands are currently occupied by a detachment of South Korean police.
South Korea and Japan are meant this year to be celebrating 40 years of diplomatic ties, and a steady improvement in relations following Japan's 1910-1945 colonisation.
But the island dispute, and the strong feelings it has aroused, highlighted how their historical differences remain extremely sensitive.
The Shimane assembly law's passage was applauded by right wing activists in paramilitary uniforms.
Known as Dokdo (Solitary islands) in Korea, Takeshima (Bamboo islands) in Japan
Also known as Liancourt rocks
Claimed by Japan and South Korea, but occupied by S Korea since 1953
Just 230,000 sq m in size, with no fresh water
But surrounding waters valuable for their fishing
A visiting group of city councillors from Seoul, one of whom had to be restrained by police from cutting off his finger, protested outside the assembly.
On Monday, two South Korean demonstrators cut off their fingers in front of the Japanese embassy in Seoul in protest at the assembly's anticipated move.
On Wednesday, protesters outside the embassy burned flags and pictures of Japan's Prime Minister Junichiro Koizumi.
The South Korean government also announced it was easing restrictions on visiting the islands. Visits had previously been limited to a few dozen people a day, because, the government said, its sea birds needed protection.
The islands are surrounded by rich fishing waters and have been a source of tension since Japanese colonial rule over the Korean peninsula ended in 1945.
There is also an ongoing dispute over the name of the body of water they are in. Japan calls it the Sea of Japan, while South Korea insists on the East Sea.
Seoul says it considers sovereignty over the islands as more important than good relations with Japan.
The South Korean foreign minister called off a trip to Japan last week in protest. Other cities have cancelled football matches and exchange programmes.
The BBC's correspondent in Tokyo says Shimane assembly members' action may reflect the increasing boldness among Japanese conservatives in standing up to neighbouring countries over historical disputes.