A simmering territorial dispute between South Korea and Japan continued Thursday, with Seoul saying it would return a protest letter sent by Japanese Prime Minister Yoshihiko Noda.

Prime Minister Noda sent the letter to protest South Korean President Lee Myung-bak's recent visit to a group of rocky islands controlled by Seoul but claimed by both countries.

Seoul says it is returning the letter on the grounds that it is contains inaccuracies regarding the islands, known as Dokdo in Korea and Takeshima in Japan.

The letter also expressed regret at Mr. Lee's recent comments that Japan's Emperor Akihito should apologize for his country's colonial rule of South Korea.

Relations between the two Asian neighbors have soured since Mr. Lee's August 10 visit, which was the first ever by a South Korean president.

Earlier this week, South Korea dismissed a proposal by Japan to take the decades-old dispute to the International Court of Justice.

The disagreement has also jeopardized talks between Japanese Prime Minister Noda and President Lee that were slated for next month on the sidelines of an Asia-Pacific Economic Forum.

Tokyo is also reportedly considering whether to call off a soon-expiring currency swap deal with South Korea, as well as several other diplomatic or economic measures in response to Mr. Lee's visit to the islands.

Meanwhile, hundreds of South Korean protesters staged a rally in front of the Japanese embassy in Seoul Thursday, denouncing Japan's claim to the islands.

Activist pumped their fists, chanted anti-Japan slogans and wore headbands emblazoned with words defending South Korea's claim over the string of islands.

The largely uninhabited islets have been under effective South Korean control since the end of Japanese colonial rule after World War Two.