Japanese authorities released the captain, Zhan Qixiong, early Saturday and he was flown home by chartered plane to Fuzhou in China’s southeastern Fujian province.

State broadcaster China Central Television showed Zhan, 41, smiling and holding his fingers in a victory sign as he walked off the plane. He was greeted by family members bearing flowers and a small group of government officials.

But hopes that his release would defuse mounting tensions were dashed when China promptly demanded an apology and compensation from Japan.

"It is unlawful and invalid for Japan to detain, investigate or take any form of judicial measures against the Chinese fishermen and trawler," China’s Foreign Ministry said in a statement. "The Japanese side must make an apology and compensation for this incident."

Japan’s Foreign Ministry said the demands were groundless and "absolutely cannot be accepted."

The captain’s detention and investigation were "an appropriate and calm response according to our nation’s laws," it said in a statement.

The diplomatic back-and-forth Saturday demonstrated that nationalistic sentiments stirred up by the incident show few signs of dissipating. Tensions have already affected business ties between the nations’ intertwined economies — the world’s second- and third-largest.

Zhan was arrested on Sept. 8 after his boat collided with two Japanese patrol vessels near a chain of islands called Diaoyu in China and Senkaku in Japan. The islands, about 120 miles (190 kilometers) east of Taiwan, are controlled by Japan but are also claimed by Taiwan and China.

Japanese prosecutors detained and questioned the captain while they decided whether to press charges, though his 14-member crew and boat were returned to China.

Zhan’s release came after intense pressure from Beijing, which suspended ministerial-level contacts with Tokyo and postponed talks on developing disputed undersea gas fields. This past week, Chinese Premier Wen Jiabao sternly threatened further action against Japan if it did not immediately release the captain.

"I firmly support the Chinese government’s stance," Zhan said Saturday after returning to China. "Diaoyu islands belong to China. It’s legal that I go there to fish but it’s illegal that they detained me. I did not violate the law."

The decision by Japanese prosecutors to let him go has prompted criticism within Japan. An editorial Saturday in the nationally circulated Yomiuri newspaper blasted the captain’s release as "a political decision that put the mending of relations as a priority."

"Needless to say, the Senkaku islands are part of Japan’s territory. The government must continue to assert this view both domestically and abroad," it said.

The tensions have spilled over into other issues.

On Thursday, Beijing said it was investigating four Japanese suspected of entering a military zone without authorization and illegally filming military facilities. The four employees of Fujita Corp., a Japanese construction company, were working to prepare a bid for a project to dispose chemical weapons abandoned in China by the Japanese military during World War II, the company said.

Meanwhile, Japanese trading company officials said that starting Tuesday, China had halted exports to Japan of rare earth elements, which are essential for making superconductors, computers, hybrid electric cars and other high-tech products. Japan imports 50 percent of China’s rare earth shipments.

China’s Trade Ministry denied that Beijing had tightened curbs on exports of rare earths to Japan, but Japan’s trade minister, Akihiro Ohata, said he had "information" that China’s exports to some Japanese trading houses had been stopped.

The territorial dispute over the islands is one of many that has strained ties between Tokyo and Beijing. Japan annexed the island chain in 1895, saying no nation exercised a formal claim over them. The islands, lying roughly midway between Okinawa and Taiwan, were administered by the United States after World War II until they were returned to Tokyo in 1972.

Washington has signaled its intention to protect its interests in those waters and to keep them open for commerce, drawing China’s irritation by urging it to resolve the disputes.

The U.S. praised Japan’s decision to release the captain. State Department spokesman P.J. Crowley said Friday that the U.S. hopes the decision will ease tensions between the two longtime Asian rivals.

However, Japanese authorities said they wouldn’t officially close the case — leaving room for some ambiguity that would allow both countries to save face.

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Associated Press writers Yuri Kageyama and Malcolm Foster in Tokyo contributed to this report.