Japan on Saturday morning released a Chinese fishing boat captain involved in a collision near disputed islands, following intense pressure from China in the worst spat between the Asian neighbours in years.

The move will ease the escalating tensions sparked when Japan arrested the captain earlier this month after his trawler collided with two Japanese patrol boats near islands in the East China Sea claimed by both countries.

Beijing suspended ministerial-level dialogue with Tokyo and postponed talks on developing disputed undersea gas fields.

Chinese Premier Wen Jiabao earlier this week sternly threatened “further action” against Japan if it did not immediately release the captain.

On Thursday, Beijing said it was investigating four Japanese suspected of illegally filming military targets and entering a military zone without authorisation.

Also, there were reports China had suspended Japan-bound shipments of rare earth metals critical in advanced manufacturing.

A day later, prosecutors announced they would release him.

Chinese fishing trawler captain returned home in early hours of Saturday by a chartered plane after his release in Tokyo.

The captain’s arrest, and the territorial dispute behind it, stirred nationalistic sentiment in China and Japan and threatened to undermine business ties between their intertwined economies the world’s second- and third-largest.