The dispute over the southern Kuril islands, known in Japan as the Northern Territories, has long been a sticking point in relations between the two countries and has kept them from signing a formal peace treaty ending their World War II hostilities.
Japan has designated Feb. 7 as "Northern Territories Day," saying that a treaty dating back to that day in 1855 supports its claim to the islands.
Kan was the top speaker at a government-backed rally of about 1,500 people in Tokyo that has been held annually since 1981 to mark the anniversary. He vowed that Japan will not back down from its claim and said visits there by Russian leaders are "an unforgivable outrage."
A smaller rally and march were held on the northern island of Hokkaido.
Asked about Kan's statements, Russian Foreign Minister Sergey Lavrov said they were "undiplomatic" and contrasted sharply with the positive tone of a meeting between Kan and Russian President Dmitry Medvedev in Yokohama last fall.
Lavrov said that Russia was ready to cooperate with Japan and continue talks on a peace treaty.
"The most important thing now is to develop economic, social and investment ties, cultural and humanitarian cooperation as well as cooperation on international issues, then it will be easier to conduct a dialogue on more difficult issues," Lavrov said.
Russia's position on its own claim to the islands appears to be getting more assertive in recent months.
In November, Medvedev became the first Russian or Soviet leader to visit the islands. Defense Minister Anatoly Serdyukov inspected military garrisons on the islands last week and said Moscow is planning to upgrade the troops' weapons there.
Both trips generated sharp protests from Tokyo, which claims Soviet army occupation of the territory just before Japan's surrender in 1945 was an act of illegal aggression.
The islands are surrounded by rich fishing grounds and are believed to have offshore oil and natural gas reserves, plus gold and silver deposits. They lie as close as six miles (10 kilometers) to Japan's Hokkaido island and are also near undisputed Russian territory.
Japan's foreign minister is scheduled to visit Moscow from Thursday and the islands dispute is likely to be at the top of his agenda. Progress is not expected.
Russia has said that it is tired of discussing the issue. Medvedev said after his visit that he considered the islands part of Russia's sovereign territory and will return there whenever he pleases.
Russia is seeking increased economic ties with Japan to help develop its Far East, and has tried to keep the territorial issue separate from economic relations. But Japan has been slow to embrace fuller trade and growth without progress toward an agreement on the islands.
Japan also has longstanding disputes over islands with China and South Korea.
AP correspondent Vladimir Isachenkov in Moscow contributed to this report.