In the video, the two men—Kenji Goto Jogo and Haruna Yukawa—appear in orange jumpsuits similar those worn by hostages previously killed by ISIS.

"To the prime minister of Japan: Although you are more than 8,000 and 500 kilometers (5,280 miles) from the Islamic State, you willingly have volunteered to take part in this crusade," a knife-brandishing jihadist says in the video.

"You have proudly donated $100 million to kill our women and children, to destroy the homes of the Muslims," he continued. "And in an attempt to stop the expansion of the Islamic State, you have also donated another $100 million to train the (apostates)."

"So the life of this Japanese citizen (Kenji Goto Jogo) will cost you $100 million," London's Daily Mail quoted the jihadist. " And the life of this Japanese citizen (Haruna Yukawa) will cost you another $100 million."

Japan says it will not yield to terrorism but has not said whether it plans to pay the ransom. (Photo: Japanese PM Shinzo Abe)

Meanwhile, Europe is on edge as police forces try to trace terrorist sleeper cells.

In Germany, 200 officers have raided 13 homes in connection with arrests last week of two suspected members of an Islamic cell.

In the U.K., the threat level against police has been raised to a new high.

And in France and Belgium, soldiers and police are also patrolling the streets.

"It's not the same as—in the days of 9/11 when we had an identifiable command and control structure," Rob Wainwright, director of Europol, explained.

"It's something much more difficult now, moving rather insidiously in our communities and across the Internet in particular," he said.

Top law enforcement officials say these terror cells aren't operating as one network, and that makes them a much more dangerous challenge.

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