Mr Abe returned to Tokyo from a Middle East tour as a result to the hostage crisis and told reporters he was consulting with leaders in the region. 

He said he instructed officials to use all possible diplomatic channels to seek the hostages' release.

Abe and other officials have not said directly whether or not Japan was considering paying the $200million in ransom being demanded for the captives, Kenji Goto and Haruna Yukawa.

Earlier, government spokesman Yoshihide Suga confirmed that Japan believed the threat to be authentic and emphasised that Japan's aid to the region was not a threat to Muslims.

Goto and Yukawa appeared in the latest ISIS video in which the terror group warns they will be beheaded unless their government pays a $200m ransom.

It came two days after Mr Abe pledged the same amount in non-military support for countries fighting ISIS in Iraq and Syria. 

The video, identified as being made by the group's al-Furqan media arm and posted on militant websites associated with the extremist group, mirrored other hostage threats it has made.

The clip, posted on militant websites associated with the extremist group, featured the British-accented militant widely known as 'Jihadi John' who appeared in the beheading videos of four Western hostages last year.

The mass killer appears on the video clad in his now familiar black and towering over two captives wearing orange jumpsuits and kneeling in the desert. He holds a serrated-edge knife similar to the one he used during the murders of five Western hostages.

The video is probably the clearest so far released by IS. Last night, British and US investigators were examining it for clues as to precisely where it was filmed – apparently a rocky desert hillside somewhere inside Syria.

In a one-minute 40-second rant, the Briton – speaking with a clear English accent – warns Japanese Prime Minister Shinzo Abe ‘this knife will become your nightmare’ if the ransom – the equivalent of £130million – is not paid within 72 hours.

It is the first time that Jihadi John – whose identity is known to the security services – has been seen this year and the first time that IS has publicly demanded a ransom.

Fuelling speculation that he might be considering paying the ransom, Mr Abe vowed to save hostages Kenji Goto Jogo and Haruna Yukawa, declaring their lives were his ‘top priority’ and warning Japan would not give in to terrorism.

Yukawa is a 42-year-old widower who reportedly has a history of attempted suicide and self-mutilation after his military goods business went bankrupt and his wife died of cancer.

He even considered cutting off his genitals because of his perceived failures in life, deciding that he would instead 'live as a woman and leave the rest to destiny'.

He travelled to Iraq and Syria last year after telling friends and family that he thought it represented a last chance to turn his life around.

Pictures on his Facebook page show him in Iraq and Syria in July.

One video on his page showed him test-firing a Kalashnikov assault rifle with the caption: 'Syria war in Aleppo 2014.'

In his last blog post, he says: 'I cannot identify the destination. But the next one could be the most dangerous.'

He added: 'I hope to film my fighting scenes during an upcoming visit.'

He came to widespread attention in Japan when he appeared in footage posted last August in which he was shown being roughly interrogated by his captors.

Yukawa's father, Shoichi Yukawa, has declined to comment, saying he was overwhelmed by the news reports of capture by ISIS.

Goto is a freelance journalist, born in 1967, who set up a video production company, named Independent Press in Tokyo in 1996, feeding video documentaries on the Middle East and other regions to Japanese television networks, including public broadcaster NHK.

He had been out of contact since late October after telling family that he intended to return to Japan, NHK reported.

Goto met Yukawa last year and helped him travel to Iraq in June, he told Reuters in August.

Footage on his last Twitter post in October shows him talking in front of the Syrian city of Kobani, which has been under siege from ISIS fighters for several months.

In early November, his wife received e-mail demands for about one billion yen ($8.5 million) in ransom from a person claiming to be an Islamic State group member, Fuji TV said.

The e-mailed threats were later confirmed to have come from a sender implicated in the killing of U.S. journalist Foley, Fuji TV said.

(dailymail.co.uk)