Mr. Kan, in a statement, calls Japan's colonial rule deeply damaging to Korean ethnic pride, saying the act robbed them of their nation and culture. He expresses "deep remorse" and "a heartfelt apology" on behalf of Japan for causing "tremendous damage and suffering."
Japan's Cabinet endorsed the statement 19 days before the 100th anniversary of the formal Japanese annexation of Korea.
The Japanese prime minister told reporters he telephoned South Korean President Lee Myung-bak on Tuesday to explain his statement.
Prime Minister Kan says, looking to the future at a time when Asia's economy is expanding rapidly, three-way cooperation among Japan, South Korea and the United States - with their shared values - can bring increased stability to the region.
The Yonhap news agency quotes Mr. Lee as telling the Japanese leader that Tokyo "should translate its words into action."
Kim Young-sun, a spokesman for the South Korean Ministry of Foreign Affairs and Trade, says Seoul hopes the statement concerning the "unfortunate past" can lead to better relations between the two neighbors.
Kim says the South Korean government expects that all Japanese citizens will share the view of Prime Minister Kan's recognition of history.
Some Japanese conservatives, however, worry that the current left-leaning government, led by the Democratic Party of Japan, will consider additional compensation claims from victims of Japanese war aggression.
Japan and South Korea signed a basic treaty in 1965 normalizing diplomatic relations. The document closed the book on the possibility of future compensation. Prime Minister Kan, after issuing the apology, said he stands by the treaty which settled the compensation issue.
Some Korean civic groups quickly brushed off the Japanese statement, saying it offers nothing new, questioned its sincerity and called apologies without compensation meaningless.
Tuesday's apology is the most significant by Japan since then Prime Minister Tomiichi Murayama, a Socialist, in 1995 issued a statement of apology to Asian countries in general to mark a half century since the end of World War II.
Japan's 35-year occupation of Korea, during which the country's culture and language were suppressed, lasted until the end of World War II, when Japan unconditionally surrendered to the Allied forces.
Koreans have always maintained that the annexation treaty was coerced and thus not valid. Japan began interfering in Korea in the late 19th century and killed the country's Queen in an effort to intimidate King Gojong. The King, in 1907, was forced by the Japanese to abdicate in favor of his son and then confined to a palace.
In the statement of apology, the Japanese government also announced it will return, in the near future, to Seoul some Korean cultural artifacts, including documents detailing royal protocol.