BAGHDAD, IRAQ, NOV. 6 -- Iraqi President Saddam Hussein tonight allowed the release of 77 Japanese hostages and 31 more from Western countries. The Iraqi leader's latest gesture aimed at appeasing world public opinion came after he met with former Japanese prime minister Yasuhiro Nakasone and on the eve of talks with former West German chancellor Willy Brandt.

Diplomatic sources here said 20 of the 77 have been held at strategic installations around the country where 139 Japanese are being held as human shields against possible attack by a U.S.-led coalition of forces in the Persian Gulf.

The official Iraq News Agency, which announced the decision, said 20 Italians, two Germans, two Australians, five Swedes and two Portuguese also will be set free.

Baghdad Radio said tonight this was another move to disprove rumors circulating in the West of maltreatment of what Iraq calls its "guests".

However, while Iraq appeared to be softening its stand on the estimated 2,000 Western and Japanese captives it still holds, letting them out in trickles, it was tightening its takeover of neighboring Kuwait, which it invaded Aug. 2. Western diplomats here said Iraq has set a deadline for all Kuwaiti residents to register as Iraqis, a step that is expected to flush out more of Kuwait's original inhabitants who have been in hiding and help change the country demographically to Iraq's advantage.

Japan's Foreign Ministry welcomed the impending return of the Japanese hostages, but also appeared edgy about Nakasone's lone-wolf diplomacy, Washington Post correspondent T. R. Reid reported from Tokyo.

"We emphasize that there has been no deal with Iraq" to win return of the hostages, a Japanese Foreign Ministry spokesman said. But Japanese reporters with Nakasone said he was discussing with Iraqi leaders the possibility of some kind of joint statement before his departure Wednesday.

Japanese television reporters in Baghdad said four of the hostages chosen to be released had turned down the offer because they hold positions of authority in the ad hoc organization of Japanese captives in Iraq. Japanese social custom would dictate that men in leadership positions should be the last to leave.

The freed Japanese hostages told reporters they were fed regularly, although most complained about the quality of the food. They said they received regular medical checkups, including x-rays. One told his family by telephone that the Iraqis had given him a diagnosis of appendicitis, and he wanted to return to Japan for the needed operation.

Brandt, who arrived here Monday, expressed hope that most of the 400 Germans held involuntarily will be set free. At a press conference with Palestine Liberation Organization Chairman Yasser Arafat, Brandt told reporters he had met with about 150 Germans at the embassy here and was not expecting to return home empty-handed.

While the United States and some Western European governments have criticized travel by prominent figures to Iraq to plead for release of the captives, Brandt, who is said to have come here with the intention of persuading Saddam to abandon detention of foreigners, said he was not negotiating but had taken up his mission as a private individual.

"I act as a private person with some political engagements," said Brandt, who came here with his government's reluctant tolerance. "I made it clear when I came. I will not negotiate about foreigners, but I will be disappointed if no attention is paid to those who have expectations."

Brandt said he had come to be helpful to "those who are suffering from the threat of war."

"There are a small number of people here who are unhappy because it is difficult to go back home," he said. "My experience is that it will be possible for a number of them to go home."

Brandt met with Iraqi Foreign Minister Tariq Aziz and Deputy Prime Minister Taha Yassin Ramadan as well as with Nakasone and Arafat.

Brandt said there was an "interconnection between the humanitarian and the political" and he criticized Secretary of State James A. Baker III, currently touring the Middle East, for his focus on war as an option.

"With due respect to the U.S. secretary of state, the real issue should not be war. The real issue should be peace," he said, adding that he was worried about the prospect of war.

Asked about linkage of regional issues to the gulf crisis, Brandt said, "I think nobody really believes in a simplistic link. But there are various important items to be settled, the Palestinian problem being one of the most important.

"But I think some more items will have to be part of the agenda or part of the package -- at least the limitation and possible control of weapons of mass destruction."

Brandt noted that the element of arms control was part of Saddam's Aug. 12 speech in which he linked an Iraqi withdrawal from Kuwait to an Israeli pullout from occupied Arab lands and the removal of Syrian troops from Lebanon.