Citing government sources, Japan's top-selling daily Yomiuri Shimbun said Tokyo had entered negotiations with concerned parties with a view to "giving up its bid to build the nuclear reactor in Rokkasho-mura," a northern village near the Pacific Ocean.

The decision followed recent unofficial talks with the European Union, which supports France's bid for building the International Thermonuclear Experimental Reactor (ITER), the Yomiuri said.

"As a result, it is now highly likely that the reactor will be built in Cadarache, France, rather than at Japan's proposed site in Rokkasho-mura, Aomori prefecture," the Yomiuri said.

But a senior official at Japan's ministry of education, culture, sports, science and technology dismissed the report, saying Tokyo would continue its campaing to bring the ITER project to Rokkasho-mura.

"We are not considering giving up our bid (for ITER) at all. There is no change in our intention" to build the nuclear reactor in Japan, vice science minister Akio Yuuki was quoted by Jiji press agency as telling reporters on Wednesday.

Aomori governor Shingo Mimura also issued a statement saying the prefecture was carefully monitoring Japan's negotiations with the EU over the ITER site.

"We understand the government will continue negotiations over Japan's proposed site of ITER tenaciously. The prefecture is paying close attention to the progress of talks," Mimura said, according to Jiji.

With Tokyo ready to concede the ITER site, the Yomiuri said Japan and the EU would likely agree on the location of the project as early as this month, ending a deadlock in talks on hosting the pioneering nuclear project.

Talks among the six parties building the ITER have long failed to decide who will host the project billed as a test bed for a safe, inexhaustible energy source of the future.

The United States and South Korea support Japan's offer to build ITER in Rokkasho-mura, while the EU, China and Russia back France's bid for the project in Cadarache.

On Monday the European Union presidency said in Paris that Japan was prepared to discuss the possibility of siting the ITER nuclear reactor in Europe.

Japanese Prime Minister Junichiro Koizumi said in Luxembourg Monday he hoped to resolve the ITER dispute as soon as possible.

"We agreed that we should engage in efforts so that an earliest possible agreement can be achieved," the Japanese leader told a joint news conference with EU leaders.

ITER, which would emulate the sun's nuclear fusion, is designed to generate inexhaustible supplies of electricity at some time in the future but is not expected to be operational before 2050.

The budget for ITER is projected to be 10 billion euros (13 billion dollars) over the next 30 years, including 4.7 billion euros to build the reactor alone.

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