TOKYO, Oct. 12 (Xinhua) -- "Japan shall make efforts to improve bilateral relationship with China," said Yukio Hatoyama, former Japanese Prime Minister.

"Japan shall fully recognize the fact that steady development of China is beneficial to Japan," the 70-year-old former prime minister stressed in a recent interview with Xinhua.

Hatoyama admitted that there are still some problems in the Sino-Japanese relationship, and the problems are rooted in the fact that "the Japanese government is hyping up the so-called 'China threat.'"

"Political relationship between Japan and China is not normal now, because Japan has been hyping the threat from China. I hope Japan could realize it is a mistake to do so and make efforts to improve its relationship with China," he said.

Hatoyama spoke highly of China's foreign policies. "China tries to make friends and promote cooperation with its neighboring countries, instead of taking advantage of them by relying on its strength," he said.

"Just as an old Japanese saying goes, the better yields the rice shoots have, the lower they bow their heads. And that is how China, a country with a population of more than 1.3 billion, deals with things (by keeping its head down)," he said.

In Hatoyama's opinion, Japan, with an aging population and only a 10th of China's population, should set its target to become a "middle power" instead of trying to become a "superpower" and dedicating itself to boosting defense capacity.

"Japan should have a friendly coexistence with its neighboring countries, especially with China, from which Japan had learned much in the past in culture and other aspects," he said.

Japan and China should establish a mechanism to address disputes and expand their channels of dialogue and cooperation, he said.

He also said that Japan should find a better balance in its relationship with the United States and China.

Hatoyama is also a member of the international advisory panel of the China-initiated Asian Infrastructure Investment Bank (AIIB).

Saying that it is "unnatural" for Japan not to join the AIIB yet, he urged the two countries to enhance cooperation for the sake of peace and development of Asia.

Hatoyama spoke highly of China's initiative of building "a community of common destiny for the mankind" and the Belt and Road Initiative.

"China is promoting co-development with neighboring countries with initiatives such as the Belt and Road Initiative. I hope Japan would not exclude itself from such programs but adopt cooperative policies," he said.

"Regarding the China-Japan relationship, I think Japan still needs to address a lot of problems, including the historical issue," he added.

Hatoyama, twice head of the Democratic Party, was prime minister of Japan between September 2009 and June 2010.