By Linda Sieg and Yoko Kubota
TOKYO (Reuters) - The United States replaced a senior diplomat handling policy toward Japan on Thursday and apologized after his reported comments threatened to strain ties between the allies at a time of political deadlock in Tokyo and worries about a rising China.
A senior U.S. official who is visiting Tokyo acknowledged the reported remarks had done some harm to ties between the world's No.1 and No.3 economies, but said the two countries would press ahead with efforts to strengthen and broaden the alliance.
Kevin Maher, director of the office of Japan affairs at the State Department, was quoted by media as telling U.S. students that residents of Japan's southern Okinawa island -- host to about half the U.S. military in Japan -- were masters of "manipulation" and "extortion."
It was an apparent reference to criticism that residents of Okinawa, one of Japan's poorest regions, want economic aid in return for accepting U.S. bases on the southern island.
The issue of U.S. military bases in Okinawa has long been a thorn in relations between the two allies, with many residents of the island resentful of bearing what they see as an unfair share of the burden for the U.S.-Japan security alliance, the core of Japan's diplomacy for more than half a century.
The furor emerged as unpopular Prime Minister Naoto Kan -- struggling to keep his own job -- scrambled to replace Seiji Maehara, who abruptly quit as foreign minister on Sunday after admitting he had accepted, albeit unknowingly, about $3,000 in donations from a Korean national living in Japan. Kan promoted junior minister Takeaki Matsumoto to the key post on Wednesday.
U.S. Assistant Secretary of State Kurt Campbell, in Tokyo for security talks, spent most of his time apologizing and said U.S. Ambassador John Roos was flying to Okinawa to do the same.
But while admitting "some harm" had been done, Campbell said the allies would continue work to define new strategic objectives and bolster defense cooperation at "two plus two" talks between foreign and defense ministers, likely in the spring.
"We are moving toward what we believe will be a major statement on the way forward giving the pressing developments in the Asian-Pacific region," he told reporters. "The alliance managers are going to be making their best efforts to ensure that the 'two plus two' is historic in nature."
Both Washington and Tokyo are concerned about China's military buildup and those worries intensified after Beijing announced it would beef up its military budget by 12.7 percent this year in a return to double-digit spending.
Kan has promised to implement a 2006 agreement to shift a U.S. Marine air base in Okinawa to a less populated part of the island, but faces stiff opposition from residents, many of whom associate the U.S. bases with crime, accidents and noise.
The affair has added to a long list of woes for the unpopular prime minister, who is struggling with a divided parliament where the opposition is blocking bills needed to implement a $1 trillion budget for the year starting on April 1.
Maehara's resignation was doubtless a disappointment to Washington given his strong pro-U.S. views and expertise in security matters.
Ties with Washington have been frayed since the Democratic Party of Japan (DPJ) took power for the first time in 2009 and then-premier Yukio Hatoyama tried to keep a campaign pledge to move the U.S. Marines' Futenma air base off Okinawa.
Kan, who took over last June after Hatoyama failed to keep that pledge and suddenly quit, has promised to implement the previous deal, but how and when remains unclear.
New foreign minister Matsumoto, who has had to hit the ground running since assuming the post, told Campbell: "Once words spread out, they cannot be taken back. I view that seriously."
But he added that the U.S. government had moved swiftly and appropriately to limit the damage as much as possible.
Veteran diplomat Rust Deming, a former deputy chief of mission at the U.S. embassy in Tokyo, will replace Maher, a former consul general in Okinawa. Campbell said Maher would remain with the State Department.
(Editing by Yoko Nishikawa)