Japan on Monday settled a suit by more than 2,000 victims of mercury poisoning, half a century after the country's worst industrial pollution disaster hit the fishing town of Minamata.

From the 1950s on a synthetic resin factory run by chemical company Chisso Corp dumped methyl mercury into the bay of the town on southwestern Kyushu island, poisoning the marine habitat and the local population.

Victims suffered spasms, seizures and loss of sensation and motor control that impaired their ability to walk and speak. Babies were born with nervous system damage and other mental and physical deformities.

In Monday's court settlement, 2,123 previously unrecognised victims were granted one-off payments of 2.1 million yen (23,000 dollars) each from the company, and a monthly state medical allowance of up to 17,700 yen.

The group of plaintiffs will also receive 2.95 billion yen for the group's activities under the agreement struck before the Kumamoto District Court.

The health problems in Minamata were first reported by a local hospital in 1956. Although Chisso was immediately suspected, its management denied responsibility and the plant continued dumping mercury until 1968, when the company was officially blamed for the health problems.

The Supreme Court in 1988 found Chisso's then president and then director of Chisso Minamata Factory guilty.

More than 2,000 victims were initially recognised as victims, and in 1995 the government decided to pay compensation to 11,000 more patients who had not previously been officially recognised as victims.

In 2004 the Supreme Court found the government was partly responsible for not stopping the company from continuing to dump toxic waste into the water.

Monday's settlement came after Japan passed a law last July which reduced the number of symptoms required for a patient to qualify for relief.

The legal change means more than 30,000 victims of the neurological illness may now qualify for compensation. The government has said it will accept their applications from May, hoping to settle all cases by year's end.

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