TOKYO - Japanese Prime Minister Shinzo Abe compared current tensions between Japan and China to rivalry between Britain and Germany on the eve of World War I, but his top spokesman denied the Japanese leader meant war between Asia's two big powers was possible.

Sino-Japanese ties have worsened recently due to a territorial row, Tokyo's mistrust of Beijing's military buildup and Abe's December visit to a shrine that critics say glorifies Japan's wartime past.

Abe, speaking to international journalists at the World Economic Forum in Davos, said on Wednesday that China and Japan were in a "similar situation" to that of Britain and Germany before World War I, the Financial Times and BBC reported.

Although the rivals then had strong trade ties, that did not prevent the outbreak of war in 1914, Abe said, adding that China's steady increase in military spending was a major source of instability in the region, the reports said.

Abe sees World War I echoes in Japan-China tensions

Special: China-Japan relations

He also repeated Japan's call for a military hotline to avert an accidental conflict.

China and Japan, the world's second- and third-largest economies respectively, have deep business ties and bilateral trade that was worth nearly $334 billion in 2012, according to Japanese figures.

Chief Cabinet Secretary Yoshihide Suga said that Abe had by no means meant that war between the two Asian giants was possible.

"I don't know the specifics of the prime minister's comment," Suga told a regular news conference in Tokyo on Thursday. But he noted that Abe, in a keynote speech at the forum, said dialogue and the rule of law, not armed forces and threats, were needed for peace and prosperity in Asia.

"He clearly stated that endless military expansion in Asia must be curbed. I believe, in these words, he underscored the importance of peace and stability in Asia," Suga said.

YASUKUNI SHRINE VISIT

In a message on Thursday to local Chinese-language papers ahead of the lunar new year, Abe said Japan had "built a free and democratic country and taken the path of peace" since the end of World War II.

"Nothing has been changed in the policy of continuing to uphold this position," he said, according to a Japanese version provided by the prime minister's office. "I believe you, who live in Japan, can understand this fundamental stance of ours."

In his keynote address at the Davos forum, Abe called for military restraint in the region and took a veiled swipe at China's military buildup.

"We must...restrain military expansion in Asia, which could otherwise go unchecked," Abe said.

"Military budgets should be made completely transparent and there should be public disclosure in a form that can be verified," Abe said, adding disputes should be resolved through dialogue and the rule of law, and not through force and coercion. He did not single out China by name.

He also defended his visit to Tokyo's Yasukuni Shrine, which is seen by critics as a symbol of Japan's past militarism because it honours leaders convicted as war criminals along with those killed in battle.

China's state Xinhua news agency blasted the Yasukuni visit again on Thursday, saying it was "taken by all peace-loving nations as a despicable kowtow to Fascism" and accusing Abe of pushing "regional tensions precariously close to boiling."

Xinhua added: "While frozen ties with neighbouring countries can never make Japan a reliable and constructive player in regional and global issues, sincere repentance over its war past can."

Abe's December 26 pilgrimage prompted a rare statement of disappointment from Tokyo's ally Washington, which is worried about rising regional tensions and fears entanglement in any conflict over tiny, uninhabited isles in the East China Sea.

US Ambassador to Japan Caroline Kennedy weighed in on the touchy topic of wartime history in an interview published by the Asahi newspaper on Thursday.

Kennedy, who arrived in Japan last year to a fanfare of attention, said that the people of the world should cheer on leaders who try to overcome history to build a peaceful future, the newspaper said.

She also said Japan had made an extremely constructive contribution to the region and world and by building trust with its neighbours, Japan could carry out that role with more confidence, the newspaper said.