Japanese Prime Minister Shinzo Abe expressed outrage at the video that was released on militant websites
"I feel indignation over this immoral and heinous act of terrorism," Abe told reporters after convening an emergency Cabinet meeting.
"When I think of the grief of his family, I am left without words," he said. "The government has been doing its utmost in responding to win his release, and we are filled with deep regrets."
He vowed that Japan will not give in to terrorism and will continue to provide humanitarian aid to countries fighting the Islamic State extremists.
The fates of Goto and the Jordanian pilot, Lt. Muath Kaseasbeh, had been linked by the militants, but Saturday's video made no mention of the airman. Jordan's government spokesman, Mohammed al-Momani, declined comment. Earlier this week, Jordan had offered to free an al-Qaida prisoner for the pilot, but a swap never moved forward.
Saturday's video, highlighted by militant sympathizers on social media sites, bore the symbol of the Islamic State group's al-Furqan media arm.
Though the video could not be immediately independently verified by The Associated Press, it conformed to other beheading videos released by the extremists, who now control about a third of both Syria and neighboring Iraq in a self-declared caliphate.
The video, called "A Message to the Government of Japan," featured a militant who looked and sounded like a militant with a British accent who has taken part in other beheading videos by the Islamic State group. Goto, kneeling in an orange prison jumpsuit, said nothing in the roughly one-minute-long video.
"Abe," the militant says in the video, referring to the Japanese prime minister, "because of your reckless decision to take part in an unwinnable war, this knife will not only slaughter Kenji, but will also carry on and cause carnage wherever your people are found. So let the nightmare for Japan begin."
Officials in Japan and the U.S. said they were trying to confirm the authenticity of the video.
"We have seen the video purporting to show that Japanese citizen Kenji Goto has been murdered by the terrorist group ISIL," said Bernadette Meehan, a spokeswoman for the White House's National Security Council, using an alternate acronym for the extremist group. "The United States strongly condemns ISIL's actions and we call for the immediate release of all the remaining hostages. We stand in solidarity with our ally Japan."
Goto, a 47-year-old freelance journalist, was captured in October, after he traveled to Syria to try to win the release of Haruna Yukawa, a colleague held by the Islamic State group.
Yukawa reportedly was killed previously, though authorities have yet to authenticate the video claiming that.
The Jordanian pilot was captured after his fighter plane went down in December over an Islamic State-controlled area of Syria.
Earlier this week, Jordan had offered to release an al-Qaida prisoner for the pilot. However, in a purported online message earlier this week, the militants threatened to kill the pilot if the prisoner wasn't released by Thursday. That deadline passed, and the families of the pilot and the journalist were left to wait in agony for two days.
Late Friday, Japan's deputy foreign minister reported a deadlock in efforts to free Goto. Jordan and Japan had reportedly conducted indirect negotiations with the militants through Iraqi tribal leaders.
The hostage drama began last week after militants threatened to kill Goto and Yukawa in 72 hours unless Japan paid $200 million.
Later, the militants' demand shifted to a release of the al-Qaida prisoner, Sajijda al-Rishawi, 44, who faces death by hanging in Jordan for her role in triple hotel bombings in Amman in 2005. Sixty people were killed in those attacks, the worst terror attack in Jordan's history.
Al-Rishawi has close family ties to the Iraq branch of al-Qaida, a precursor of the Islamic State group.
Associated Press writers Jon Gambrell in Cairo and Karin Laub in Amman, Jordan contributed to this report.
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