"The fact that [China] sent a naval ship to the contiguous waters of our Senkaku Islands for the first time is an act that unilaterally increases tension and our nation is gravely concerned", Chief Cabinet Secretary Yoshihide Suga said.
On the sidelines of the Shangri-la dialogue in Singapore on Friday, Defense Minister Gen Nakatani and his Indian counterpart, Manohar Parrikar, agreed to boost trilateral cooperation with the United States amid China's growing assertiveness in the region, Kyodo News reported.
European markets are lower across the board, as Chinese export data stirs concerns about the health of the global economy.
"Chinese naval ships have the right to sail through China's territorial waters", it said.
The government will remain on alert and continue to monitor the two countries' naval vessels.
As tensions have heated up over the South China Sea, where China has drawn global scrutiny and criticism for its rapid construction of artificial islands, the East China Sea has grown relatively more placid, particularly compared to far more acute tensions and bilateral incidents that were apparent to regional security analysts in 2013 and early-2014. Chinese warships in the area are "rational and legal", Beijing said.
Contiguous waters are a 12-nautical-mile band that extends beyond territorial waters. Chinese ships, mostly fishing boats, have sailed in the disputed area practically non-stop since the islands came under Japanese authority.
The Senkakus are a group of uninhabited islets now controlled by Japan in the East China Sea.
While Japanese Prime Minister Shinzo Abe has succeeded in calming the mood enough to hold two summits with President Xi Jinping, the recent incidents risk reigniting frictions. While considered worldwide waters, countries claiming such a zone exercise control over the area for various purposes including customs and sanitation.
China has said it doesn't recognize the jurisdiction of the Hague tribunal and won't abide by an unfavorable ruling.
Three Russian military vessels were also seen in the waters around the disputed islands, according to Jiji Press, entering around 21:50 on Wednesday and leaving around 03:05 on Thursday. At the same time, the Philippines brought a case against China in the Permanent Court of Arbitration in The Hague, to test its claim over much of the sea.
China claims most of the South China Sea, through which $5 trillion in ship-borne trade passes every year.
Japan's southwestern island chain, which hosts the biggest concentration of USA military personnel in Asia, blocks China's east coast access to the Western Pacific.
China was censured at the Group of Seven summit in Japan, and then again in June at the Asia Security Summit over its expansionist activities. There was no immediate comment from Beijing but China in the past has warned Japan not to take any "provocative" action over the disputed islands.
China is pushing claims in areas of the neighboring South China Sea where other Southeast Asian governments have overlapping claims.