A 30,000-strong Russian community now lives on the islands and there is also a Russian military presence on Iturup.
In early August 2006, the Russian government backed a 17bn-rouble ($630m) plan to develop the entire Kuril island chain, including improving energy and transport infrastructure.
Chances of an early resolution to the dispute look slim.
Vladimir Putin indicated in 2004 that the offer of a return of the two southernmost islands was still on the table, but showed no signs of relinquishing the two larger islands.
Natural resources are part of the reason.
The islands are surrounded by rich fishing grounds and are thought to have offshore reserves of oil and gas. Rare rhenium deposits have been found on the Kudriavy volcano on Iturup.
Tourism is also a potential source of income, as the islands have several volcanoes and a variety of birdlife.
Meanwhile, the Japanese government has worked to maintain public awareness of the dispute.
Periodic visits by relatives of those displaced after the war to pray before their ancestral shrines have made the issue a highly emotive one for the Japanese public.