TOKYO, JULY 5 -- Japan will seek to tilt the industrialized world away from helping the Soviet Union and toward resuming aid to China during the Houston summit of world leaders next week, Japanese officials said today.

The officials said Prime Minister Toshiki Kaifu, who leaves Friday for Houston to attend the summit of seven industrialized powers, will support technical assistance for Soviet President Mikhail Gorbachev's perestroika reforms but oppose any direct financial aid. One official said such aid might be counterproductive, "like giving sugar to a diabetic," until Moscow proceeds further with economic and social change.

At the same time, Japan will argue that it is time to ease sanctions that industrialized nations slapped on China a year ago in response to Beijing's crackdown on the democracy movement.

"We have consistently appealed to the international community that it is not the right thing to isolate China," a Foreign Ministry official involved in summit preparations said today. "The important thing in the summit is to send out a political signal that the international community, while not fully satisfied with their reform efforts, still hopes to see China reintegrated or returned to normal relations with the international community."

The official added that the West should recognize that it is "quite difficult" to introduce "such a Westernized notion as democracy" to such a huge country as China, which "lacks a tradition of individualism." The best way to promote democracy, the official said, is by helping to raise the standard of living.

While Japanese officials stressed their support for reform in the Soviet Union, they view instability in China -- a country of 1.1 billion people on Japan's doorstep -- as far more threatening than turmoil in Moscow, thousands of miles away. Historically, Japan's relations with China are far closer and more complex than its century of hostility with Russia.

Trade relations reflect the same patterns. Japan is not only China's biggest aid donor but also its largest investor and trading partner. From 1984 through 1988, Japan's trade with China totaled $82.6 billion, still a small portion of Japan's overall trade but much bigger than its $24 billion total trade with the Soviet Union during the same five years.

While Japan's government does not want improved economic relations with the Soviet Union until the two nations sign a peace treaty and resolve territorial disputes pending since World War II, Japanese industry has more business-like reasons for its disinterest.

After a flirtation with Siberia's potential a decade ago, many Japanese business executives decided that the Soviet Union was a poor investment bet as long as its infrastructure remains poor, its foreign currency reserves low and its bureaucracy difficult to do business with.

Japanese officials also maintain that the perestroika reforms and "new thinking" that have transformed Europe have yet to take hold in the Pacific region, where they say the Soviets continue to modernize their military forces.

Kaifu is likely to find himself at odds with several European leaders with regard to policies toward both Communist giants. West Germany, France and Italy want to lend billions of dollars to Gorbachev's reform efforts, while the European Community has decided not to reconsider its sanctions against China until at least September.

President Bush has taken a position similar to Kaifu's on aid to the Soviet Union. Bush has not indicated a readiness to resume aid to China, although he has supported the idea that it is counterproductive to force China into greater isolation. Leaders of Britain and Canada also will attend the summit.

As the only Asian leader at the conference, Kaifu will seek to counteract what Japan sees as "a certain Euro-centrism" taking shape in the summit agenda, a Foreign Ministry official said. Kaifu will argue that aid to Eastern Europe, while critical, should not detract from the industrialized nations' efforts to assist developing countries in Asia and elsewhere, the official said.

Most of all, Kaifu will seek to soften the West's condemnation of China, which has persisted since the massacre of democracy activists in Tiananmen Square in June 1989, the official said. He said Japan believes that the West must "respond in kind to those positive signs emanating from China," such as the lifting of martial law, the release of some political prisoners and the decision to permit dissident scientist Fang Lizhi and his wife to leave their confinement in the U.S. embassy for exile in Britain.

Japan stopped issuing new loans after last year's crackdown. But it also has pleased China with a number of gestures such as banning a democracy movement radio broadcasting ship from docking here, returning a hijacker who claimed to be a democracy activist and using less harsh language to condemn last year's crackdown than other Western nations.

A senior Chinese official, state councilor Li Tieying, visited Kaifu this week to urge a resumption of Japan's promised $5.4 billion loan program. Many senior officials here support that request, although Kaifu himself has not said when he hopes to resume loans.

"We would certainly consider the advisability of resuming our aid efforts to China after the summit," an official said today.

But Kaifu and Foreign Minister Taro Nakayama both have said flatly that Japan will not provide direct assistance to the Soviet Union until it returns a group of north Pacific islands that Japan claims.

"Until the Northern Territories issue is solved, Japan has no intention of offering any official financial assistance to the Soviet Union," Nakayama said in a speech Wednesday. But Foreign Ministry spokesman Taizo Watanabe also said, "Our position is not to prevent others from extending aid."