WASHINGTON (AP) -- A grand, aging red-brick house in Washington concealed by a pair of towering magnolia trees has become an unlikely setting for South Korea's festering grievances against Japan and a sign of growing tensions between two staunch U.S. allies.

More than a century ago, the building housed the first Korean diplomatic mission in the U.S. But shortly before annexing Korea in 1910, imperial Japan bought it for a nominal $5 fee then sold it off. Now South Korea has reacquired it for $3.5 million and plans to use the building to showcase its history _ a jab at modern-day Japan.

South Korean Embassy spokesman Byung-Goo Choi said the sale of the legation building 102 years ago was forced and "symbolically demonstrates imperial Japan's plunder."

The Japanese Embassy said it would refrain from commenting on the purchase, as South Korea has not conveyed its position or raised the issue with Japan.

The Japanese occupation of Korea ended with the fascist defeat in World War II, and nowadays the two nations have many reasons to get along. Both are well-established and prosperous democracies that share U.S.-supported interests in countering the nuclear threat of North Korea and managing China's rise as the region's superpower. The U.S., which has tens of thousands of troops in both countries, is keen to promote Japan-South Korea ties, to help sustain American influence in the region.

But the tensions have set back nascent military and intelligence cooperation. Beyond the history of the annexation, Korean anger remains over imperial Japan's use of Korean sex slaves during the war. Also, Japan claims tiny islands that are occupied by South Korea.

That dispute escalated last month when South Korea's President Lee Myung-bak made an unprecedented visit to the rocky Dokdo islands _ called Takeshima by Japan. That drew unusually stern criticism from Japan, whose Prime Minister Yoshihiko Noda sent a letter of protest, only for South Korea to reject it and send it back _ by registered post.

A semblance of diplomatic normality returned when the two leaders met briefly on the sidelines of an Asia-Pacific summit in Russia last weekend. But nationalist sentiments could be further enflamed with South Korea set for presidential elections in December and Noda's unpopularity at home growing. South Korea has rejected a Japanese proposal for the dispute to be settled in the International Court of Justice.

The purchase of the Korean legation in Washington is the culmination of years of South Korean interest, albeit low-key, in getting the building back. Kiwon Yoon, a Korea-born travel agent based in the Washington suburb of Fairfax, Virginia, said he began campaigning for it after a South Korean academic in 1999 discovered archive documents revealing the legation's existence.

The documents show that in November 1891, Emperor Gojong, one of the last monarchs of a then-unified Korea, bought the four-story building in Washington's upscale Logan Circle for $25,000. It was part of a diplomatic push to consolidate ties with the emerging Pacific power of the United States, as Korea found itself surrounded by larger nations competing for influence: China, Japan and Russia.

For centuries, Korea had been a tributary state of China that lies to its west, but by the late 19th century China's influence was waning as Japan's power rose, leading to its annexation of Korea in August 1910.

According to the South Korean Embassy, Japan had been in effective control of the legation by 1905, but it formally bought the building five years later, two months before the annexation. The seven-bedroom property, which lies about a mile (almost two kilometers) from the White House, was quickly sold by Japan to an American buyer in the same year.

In the mid-2000s, some Korean-Americans raised about $80,000 as they campaigned to buy the property, but it was far short of the amount needed. The South Korean embassy began negotiating with the owner in 2007, and the government in 2009 budgeted money to buy and renovate it, but only this year met the asking price. The deal was completed in mid-August.

South Korean officials are still deliberating exactly how to use the building but expect to reopen it within months. They say the building's structure remains much the same as it was 100 years ago.

Amy Lee, an 82-year old granddaughter of Gojong and one of the last survivors of the Korean royal court, said it was important for Korean pride. This year also marks the 130th anniversary of U.S.-Korean relations.

"I'm glad we have become strong enough and have enough money to buy it back," said Lee, who had campaigned with Yoon to return the building to Korean control.

Lee, who migrated to the United States in 1956 and worked as a Korean specialist librarian at Columbia University in New York for 27 years, wants to elevate the legacy of her grandfather and his efforts to adopt a more open foreign policy for Korea and maintain independence.  But she also sees the purchase of the old legation as a riposte to Japan.

She expresses anger at Japan's attitude toward its historical legacy _ particularly on the issue of the tens of thousands "comfort women" that were recruited as sex slaves for Japanese forces.

Japan issued a formal apology in 1993, but has failed to convince South Korea it is truly contrite about its wartime record. Suggestions that Japan might review the 1993 statement on the grounds that no direct descriptions of forcible recruitment of "comfort women" have been found in Japanese official records have provoked Korean anger.

"They probably don't know what their fathers and grandfathers did, or understand completely. Or it could be political. Whatever the reason is, how dare they think that way?" said Lee.