Japan's Prime Minister Naoto Kan on Wednesday called on China to use its influence over North Korea to ease tensions on the divided peninsula, after Pyongyang's deadly shelling of a South Korean island.

Kan also held a telephone conversation with South Korean President Lee Myung-Bak in which he underlined Japan's strong ties with Seoul and Washington and agreed to work closely together.

The government also hinted it would consider tougher sanctions against Pyongyang in the wake of Tuesday's attack on the border island of Yeonpyeong, which killed four and wounded 18.

"We should ask China, which has significant influence over North Korea, to make efforts to jointly restrain North Korean actions," said Kan at the opening session of a cabinet task force set up in response to Tuesday's attack.

"It has created extreme concerns in not only South Korea but also East Asia, including Japan," Kan said.

The artillery fire on the border island of Yeonpyeong killed two marines and two civilians in one of the worst incidents since the Korean war, sparking outrage in the South and worldwide condemnation of Pyongyang.

"It was an unforgivable act," Kan told the meeting. "I strongly condemn North Korea. We will respond by closely maintaining ties with South Korea and the United States."

Tokyo has no diplomatic relations with Pyongyang and interactions between the two countries have long been tense because of the communist state's nuclear and missile programmes and past kidnappings of Japanese nationals.

Kan's comments added to the growing pressure on Beijing to rein in its wayward ally. China has avoided criticising North Korea despite numerous provocations over the years by Pyongyang.

Experts say Beijing's approach is guided by a desire to prop up the regime of Kim Jong-Il out of fear that its collapse could spark a flood of refugees into China.

It also wants to check US influence in the region, and fears that an eventual unified Korean peninsula would be dominated by South Korea's US-allied government.

Foreign Minister Seiji Maehara held talks in Tokyo with China's ambassador to Japan, Cheng Yonghua, and said both agreed to work together towards easing the tension.

"I told (Cheng) that the role China plays is significant," Maehara told a news conference. "We confirmed that as neighbour countries, Japan and China should cooperate," he added, condemning the "indiscriminate" attack.

Economic and fiscal policy minister Banri Kaieda said that Japan may "be on course to strengthening sanctions" against North Korea after the attack.

Japan, which has long regarded North Korea as a military threat, took the lead in sanctions against Pyongyang over its nuclear and missile programmes as well as the kidnapping of Japanese nationals during the Cold War.

In a related move, Kan on Wednesday called for the suspension of plans to apply the nation's school subsidies programme to ethnic Korean students attending pro-Pyongyang schools in Japan.

Finance Minister Yoshihiko Noda separately said he would pay close attention to financial markets in the wake of the attacks.

"We must do our utmost to ensure there will be no impact on our economy," Noda told reporters, according to Dow Jones Newswires.