Wanting to gather more information on China, the US National Security Agency (NSA) approached the Japanese government in 2011 to allow it to tap the international fibre-optic cables that traverse the country and carry much of the traffic across East Asia.
Citing a lack of legal framework and personnel, the Japanese government rejected the NSA requests to provide communication data, including internet activity and phone calls, sources told The Japan Times over the weekend.
The newspaper said that due to a lack of legislation preventing the intercepting of communications in the country, even the communications of suspected terrorists, the government could not acquiesce to the NSA request. Sources told the newspaper that due to the smaller number of intelligence employees in Japan, the private sector would had to have been involved in the creation of such data collection.
The news falls on the back of revelations last week that the NSA was tapping the phones of 35 world leaders. More than 200 numbers were handed over by a US official, including close to three dozen prime ministers and presidents, none of whom were named in the documents leaked to The Guardian.
Chief among the leaders who the NSA allegedly targeted for phone tapping is German chancellor Angela Merkel. The NSA denied German press reports that President Barack Obama was personally informed of US spies tapping Merkel's phones.
NSA chief general Keith Alexander "did not discuss with President Obama in 2010 an alleged foreign intelligence operation involving German Chancellor Merkel, nor has he ever discussed alleged operations involving Chancellor Merkel", spokeswoman Vanee' Vines said.
"News reports claiming otherwise are not true."
German media said the phone tapping may have begun as early as 2002, further stoking global outrage over revelations of the NSA's broad snooping into the communications of several dozen world leaders and ordinary citizens.
Bild am Sonntag newspaper quoted US intelligence sources as saying that Alexander had briefed Obama on the operation against Merkel in 2010.
News weekly Der Spiegel reported that leaked NSA documents showed that Merkel's phone had appeared on a list of spying targets for over a decade, and was still under surveillance weeks before Obama visited Berlin in June.
If the spying against Merkel began as reported in 2002, it would mean the United States under then president George W Bush targeted her while she was still the country's chief opposition leader, three years before she became chancellor.
The revelations threatened to hurt transatlantic ties, and led Merkel to confront Obama in a phone call on Wednesday, saying that such spying would be a "breach of trust".
The White House has said that it is not monitoring Merkel's phone calls, and will not do so in the future, but has refused to say whether it did previously.