The militant group led by Abu Musab al-Zarqawi claimed responsibility in a Web posting Tuesday for the beheading of a Japanese backpacker and claimed Japan had offered millions of dollars in ransom to free him.

The Japanese government, which had rejected the kidnappers' demands that it withdraw troops from Iraq, denied offering any payment.

In the statement on an Islamist Web site, the Al Qaeda-affiliated group posted a gruesome video of the slaying of Shosei Koda (search), whose decapitated body was found wrapped in an American flag in northwestern Baghdad on Saturday.

It boasted of carrying out the killing despite the money offer. "The world should know, from east to west, north to south that Al Qaeda is firm on its jihad, God willing, in spite of the Japanese government offering a ransom of millions of dollars," the statement said.

"If Japan wants to avoid what's waiting for it, then let it simply pull out its troops, who are allied with the Crusaders, from Iraq," the statement said. "Otherwise, it will sink ... in the hell of the mujahedeen."

Japanese Foreign Ministry spokesman Akira Chiba (search) flatly denied the group's claims of a ransom payment offer.

"The group's allegations about a ransom is completely false," he said. "But the government of Japan will not comment on anything else in the group's statement."

A video posted on the Internet on Oct. 26 said Koda had been kidnapped by al-Zarqawi's followers, who vowed to kill him unless Japan withdrew its troops from Iraq. The Japanese government refused.

The beheading renewed pressure on Prime Minister Junichiro Koizumi (search) to withdraw his country's troops, with the opposition blaming his pro-U.S. policy for the slaying.

In the latest video, Koda was seated, with his arms bound behind him, on an American flag while one of three hooded men read a statement. After they finished, they leaped on the young Japanese, raised his head by his hair and severed his head as they shouted "Allahu Akbar," or "God is great."

Al-Zarqawi's group is believed responsible for beheading a number of foreigners, including three Americans and a Briton. It claimed responsibility for those slayings and made no claims in those cases that payments were offered.