Japan began allocating rights for gas exploration in a disputed area of the East China Sea yesterday.
Japan's economy Trade and Industry Ministry said it will approve corporate bids "as quickly as possible" for deep-sea gas exploration in the sea.
A ministry official said approval was expected within two to three months.
China and Japan remain divided over the issue of a demarcation line in the waters of the East China Sea. China neither accepts nor acknowledges the "median line" unilaterally drawn by Japan without discussion between the two countries.
A senior Chinese official warned Tokyo on Tuesday not to award the test drilling rights and said doing so would "fundamentally change the issue.''
Some japanese media said officials had pressed for a decision on gas exploration before Foreign Minister Nobutaka Machimura goes to Beijing for a two-day visit on Sunday to seek a solution to the broader diplomatic impasse.
But top Japanese government spokesman Hiroyuki Hosoda said the timing of the decision was coincidental.
"This (drilling rights) is an issue that was pursued as an industrial issue. It just happened that awarding exploration rights began today," Hosoda told a news conference.
Prime minister Junichiro Koizumi said Japan was not trying to be confrontational.
"The aim is to turn a sea of confrontation into a sea of cooperation," Koizumi told reporters in Tokyo.
Hosoda noted that Japan had apologized in the past for the suffering caused by its wartime aggression.
"We have expressed deep reflections over history," he said. "There is no change in that point of view. We have said many times that we want to maintain this attitude sincerely and put it into practice."
Many in the countries that were victims of Japan's World War II-era invasion feel past apologies have been insincere, partly because senior Japanese politicians often make contradictory remarks.
The decision on drilling rights follows Japan's approval last week of school history books that gloss over Japanese wartime atrocities.