Even though she has encountered multiple military setbacks , Japan still officially declares, ever since 1949, that Dokdo is a part of Japan. South Korea actively protests against this territorial claim every time.
The Ambiguity of Actions!
The dispute over Dokdo imposed a great threat on the normalization of diplomatic relations between Japan and the South Korea from the end of the Pacific War in 1945, to June 1965, when the Basic Relations Treaty was signed. Just like the San Francisco Peace Treaty in 1952, issue about sovereignty over Dokdo was intentionally left out of the final text of the treaty due to the request of the Korean government who sought for peaceful solution. However, Korean government did not completely neglect the issue; conflict over Dokdo was discussed between Korean Foreign Minister Lee Dong-won and Japanese Foreign Minister Etsusaburo Shiina, without a clear solution as a result. This kind of ambiguous action was not popular amongst the Korean public, who hoped for more definite territorial boundary between Korea and Japan. Korean public demanded the war reparations from Japan, and ownership of Dokdo on Korea's side of the peace line. The treaty of 1965 was a complete failure in terms of determining the ownership over Dokdo.
What does America say?
America has a close diplomatic relationship with both South Korea and Japan. So it would be interesting to know what's her position in this issue. The American position over the ownership of Dokdo is quite neutral; American government do not recognize sovereignity of both Korea and Japan over the islets. The America has taken this stance ever since she has signed the defense pacts with both South Korea and Japan. For the case of Japan, America takes into account the fact that the Japanese do not have a control over Dokdo, thus placing Dokdo outside the territory governed by the Japan-U.S. Mutual Security Treaty. For the case of Korea, it is unlikely that the U.S. would recognize Korea´s claim to the island, just looking at the history of this dispute. In addition, it seems like the Mutual Defense Treaty between the U.S. and the South Korea is inapplicable since according to the treaty, America is only responsible for defense of the territory recognized by the U.S. as belonging to South Korea.
So what's going on today?
The most serious conflict in last 20 years came in1996 when Japanese Foreign Minister Yukihiko Ikeda publicly reaffirmed Japan's territorial claim to Dokdo immediately after South Korean government announced the plan to build a wharf on them. Even though this was a statement to gain more popularity amongst Japanese voters by sounding 'tough', this event has greatly upset South Koreans. In response to the careless action on Japanese part, South Korean defense ministry changed its plan from trying avoid a political conflict with neighboring nation by canceling that year's spring military maneuvers near Dokdo to not canceling the event. Afterwards, Japanese "self-defense" forces expressed further aggression by conducting exercises in the same ocean that were meant to practice the re-occupation of Dokdo. Japan then later claimed that the military drill was in fear of overly negative reaction from Korea.
The issue over Japanese Textbooks
The branch of this controversy is on Japanese denial to acknowledge the full history of the sovereignty dispute over Dokdo in history textbooks published for Japanese high schools. In April 2002, the Japanese Ministry of Culture and Science approved texts from the book publishing companies, Meiseisha and Jitkyosha, the content of which contains the questions on Korean claim to Dokdo with huge bias and no reasonable explaination on Korean argument. Furthermore, Japanese Ministry of Education and Culture even considers to neglect the history of Korean claims to Dokdo and old Japanese documents (written by Japanese people) that refers to the justice of such claims. This issue over Japanese textbooks reflect that Japan does not want the closure of Dokdo island dispute, and it also shows how immature their attitude is.
However, recently in 2008, the Japanese government has decided not to include any territorial description of Dokdo, the easternmost South Korean islets, in a high school teachers' guidebook scheduled for revision early next year. [...] The alleged decision apparently reflects Tokyo's intention not to strain the South Korean-Japanese relationship amid growing signs of its normalization. (Source: Yoo Cheong-mo, Yonhap News)
Why do Koreans and Japanese care about Dokdo so much?
The Dokdo issue is not just about the ownership of the two islets or the blind nationalism, because Dokdo has high economic value for its energy resource and fishing grounds. Both Korea and Japan view the ownership of Dokdo as a great path for their interests in the surrounding ocean. Scientists argue that in about 16,600 square nautical miles of sea and seabed of the surrounding ocean, there are areas that may hold some 600 million tons of gas hydrate (natural gas condensed into semisolid form), which is believed to be deposited along the broad seabed extending from Dokdo to Guryongpo, North Kyongsang Province. Gas hydrate holds a high economic value because it is a next-generation energy source that could be used in liquid natural gas if adequate technology is made available. In addition, Dokdo is surrounded by fertile fishing grounds, and Korea and Japan, the nations with one of the world's largest fishing industry, frequently attempt to bolster their claims to it in a fear of dwindling sea resources. Japanese fishing officials announced that the depletion of fish stocks in Pacific means that Japan must rely more on waters closer to homeland. The northwestern Pacific in general has more underused fish stocks than other areas, however only few of such marine areas in East Asia remain unclaimed (Many claims even overlap)
The Everlasting Peaceful Coexistance
or Silence before Storm?
According to the Law of the Sea Convention, every nation with a seacoast is allowed to exercise jurisdiction over resources and certain activities in waters extending as much as 200 nautical miles from a coastal baseline-an Exclusive Economic Zone (also known as EEZ) The problems here lie in the details, and this is nowhere better illustrated than in the Law of the Sea Convention, in which the extent and degree of jurisdiction a nation exercises is determined by a host of arcane factors, including the drawing of baselines, distance from the coast, and the meaning of "continental shelf," "equidistant lines," and the like. According to the convention, a nation can claim sovereign rights over resources and all related activities, as well as jurisdiction over artificial structures, scientific research, and protection and preservation of the marine environment, within its 200-nautical-mile Exclusive Economic Zone (EEZ). But because tiny islets that are only flyspecks on a map may be used as a basis to claim an Exclusive Economic Zone, many maritime disputes focus on the ownership of tiny islands, reefs, and other "features" such as Dokdo, the Diaoyu islands in the East China Sea, and the Spratly/Xisha Islands in the South China Sea. Unfortunately, the convention offers little specific guidance for the settlement of boundary disputes. Thus nations may still feel a need to engage in provocative military posturing, and the possibility of military conflict remains. The 1996 dispute over Dokdo only further stressed the already fragile relations between South Korea and Japan. Nonetheless, ways have been found to deal with boundary uncertainty. Under a joint-development approach, these countries agree on the extent of the area in dispute, set aside the actual boundary question, and reach agreement on joint exploration and exploitation of hydrocarbons. This strategy is supported by the Law of the Sea Convention, which stipulates that, pending agreement on the delineation of the continental shelf or the boundaries of Exclusive Economic Zones (EEZs), states should try to enter into provisional arrangements. Perhaps the strongest reason for a state to opt for a joint undertaking is to protect its interests in potential oil or gas deposits, combined with a desire to maintain good relations with the other state. Joint development is an idea that may look increasingly attractive as the need for oil intensifies. Japan and South Korea have taken such an approach, and have established 230-mile EEZs under the U.N. Convention on the Law of the Sea. After years of negotiation, the two countries signed the treaty in July 1996, setting quotas and regulations in each other's zones.