Speaking on Tuesday at a conference in Jerusalem during a tour of the Middle East, Prime Minister Shinzo Abe demanded that the "Islamic State" (IS) group immediately free two Japanese hostages unharmed.

Abe said Japan would still go ahead with a promise of non-military aid it has pledged to help victims of IS, demanding that the hostages be released "immediately" and "unharmed."

"I am extremely indignant at such an act," Abe added.

"The international community will not give in to terrorism and we have to make sure that we work together."

Asked whether he would pay the $200 million (172,764 euros) ransom, Abe said: "With regard to this case, we attach the utmost priority to saving lives, and gathering information with the help of other countries."

"We'll make the utmost efforts to save the lives [of the captives] from now on," he added.

Jihadists posted a video on militant websites associated with the extremist group on Tuesday. In it, a knife-brandishing jihadist said Japan had been targeted over Tokyo's financial support for what IS perceives to be Western efforts against it. Tokyo has promised $200 million in non-military aid to support countries hit by IS violence.

"You now have 72 hours to pressure your government into making a wise decision by paying the $200 million to save the lives of your citizens," said the militant, speaking with a British accent.

The "Islamic State," which holds a large swathe of Iraq and Syria under its control as a self-declared caliphate, has already beheaded and shot dead hundreds of captives, most of whom were Syrian and Iraqi soldiers.

The militants are also currently holding British photojournalist John Cantlie and a 26-year-old woman who was captured last year in Syria where she was working for aid groups.

ksb/rc (Reuters, AP, AFP)