TOKYO (AFP) - Australian Foreign Minister Stephen Smith held talks Thursday on resolving a dispute with Japan over whaling, but he said Canberra was still considering taking the row to international courts.

Australia and New Zealand have led an outcry over Japan's annual whaling expeditions to the Antarctic Ocean, which have been hindered by animal rights activists.

Smith denied an Australian media report that Canberra would drop plans to take the whaling issue to international courts because New Zealand had discovered "significant difficulties" with the approach.

"We are looking at the possibility of international legal action, we are considering that as one of our options," Smith told reporters, according to a transcript from his office.

Australia's new left-leaning government sent a customs vessel to track Japanese whalers in Antarctic waters this year and gather evidence for a possible legal case.

However, there has not yet been any announcement on whether a case would proceed.

"We'll make a decision about the need for legal action in due course at a time of our own choosing," Smith said.

"But we are very keen to exhaust diplomatic measures to try and bring this matter to a conclusion."

In his talks in Tokyo, Smith told Japanese Foreign Minister Masahiko Komura that "we must not let this damage the Japan-Australia relationship," according to a Japanese diplomat who attended their meeting.

"Ministers Smith and Komura mainly discussed how to approach and resolve the issue through diplomacy, knowing full-well the positions of the two countries," the official said on customary condition of anonymity.

Komura asked Smith to continue investigating high-seas clashes against the Japanese whaling ship by activists from the militant Sea Shepherd environmentalist group.

"Minister Smith said that, while the countries involved are talking bilaterally, it makes things difficult if an issue involves a third party," the Japanese diplomat said, declining to elaborate further.

The Southern Ocean Whale Sanctuary was proclaimed by the International Whaling Commission in 1994.

But Japan uses a loophole allowing whaling for scientific purposes to kill hundreds of the ocean giants every year, arguing that whaling is part of its culture.

Smith said reports that New Zealand had scrapped plans for legal action were inaccurate.

"I know that it's been reported in that way, but my understanding of the New Zealand position is that the New Zealand government reserves the right to pursue legal options if diplomatic means fail," he said.

Any legal action is likely to take place in either the UN International Court of Justice in The Hague or the International Tribunal for the Law of the Sea in Hamburg.

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