The organisation that represents North Korean residents of Japan accused the Japanese government of blocking the sale of its headquarters in Tokyo to a priest who wanted to permit the Chongryon group to remain in the building.
Ekan Ikeguchi, the chief priest of the Kagoshima-based Saifukuji temple, has admitted defeat in his campaign to raise 4.52 billion yen (HK$341.45 million) for the 10-storey building and the prime 2,300-square-metre plot that it occupies in the Chiyoda district.
The building - the venue for several events every year in honour of the North Korean leadership - was sold off in March by government-backed Resolution and Collection, in a bid to recoup loans amounting to more than 62 billion yen that it had extended to the residents' association.
Ikeguchi said he hoped that by permitting Chongryon to remain in the property, which acts as North Korea's unofficial embassy in the absence of formal diplomatic links, it would "promote harmony among Asia's different ethnic groups, including North Korea".
Announcing he had been unable to raise the funds, Ikeguchi said: "It is extremely regrettable. I wish to offer my apology to companies that I sought loans from and the court."
Discussions with five financial institutions and companies failed to raise the 4.52 billion yen, which was a lot higher than the 2.69 billion yen that the Tokyo District Court had estimated as the value of the property.
Chongryon reacted angrily to the news that new bids are being sought for the property and that it would be required to leave its headquarters. "Mr Ikeguchi tried but was unable to get any financial support from banks or companies," said So Chung-on, the director of Chongryon's International Affairs Bureau. "This was because of pressure from the Japanese government.
"It was not fair for the government to apply pressure in this matter. This building plays an important role as a liaison office or embassy for North Korea in Japan. The Japanese government should consider that more diplomatic problems will occur if this building is sold."
It appears that Ikeguchi's potential investors were scared off by suggestions that he has close connections with Nihon Seinensya, the biggest far-right group in Japan.
Nihon Seinensya is controlled by the Sumiyoshi-kai, Japan's second-largest criminal gang, with some 5,900 members, say police, and is involved in a wide range of illegal activities.
Ikeguchi also has links to Masahiro Namikawa, known as Pak Jeong-ho, the Korean head of the Kyushu Seido-kai, a 380-strong group that is designated as one of the most dangerous yakuza gangs in Japan. Pak is one of the wealthiest gang leaders in Japan and is reputed to have earned his lavish lifestyle through importing drugs manufactured in North Korea.