TOKYO - The Japanese government has exchanged the official contract on the purchase of Diaoyu Islands with Kurihara family whom the Japanese side called "the private owner", NHK reported Tuesday morning.

Japanese Cabinet on Tuesday morning decided to disburse reserve funds to purchase part of China's Diaoyu Islands, before signing a sales contract with whom the Japanese side called "the private owner" of the islands scheduled later Tuesday, it said.

The Japanese government will pay the expense of 2.05 billion yen ($26.15 million) with government reserve funds to the Kurihara family, who claims to own the Diaoyu Islands in the East China Sea.

Japan's Chief Cabinet Secretary Osamu Fujimura announced Monday afternoon that the central government had reached the final agreement with the Kurihara family to buy three of the five uninhabited islands.

He said the Japanese government hopes the purchase would not undermine the overall bilateral relations with China.

The Chinese Foreign Ministry reacted quickly on Monday, saying Japan's purchase of the islands is illegal and invalid and China firmly opposes the move.

Chinese President Hu Jintao, during his meeting with Japanese Prime Minister Yoshihiko Noda on Sunday, made clear China's position on relations with Japan and on the Diaoyu Islands issue.

Hu pointed out that China-Japan relations had recently faced a severe situation due to the Diaoyu Islands issue.

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