Chinese President Hu Jintao and Japanese Prime Minister Yoshihiko Noda held a meeting here today.
The two leaders met for 15 minutes on the sidelines of an Asia-Pacific Economic Cooperation (APEC) summit in Vladivostok.
Noda said Japan hoped to develop a mutually beneficial, strategic relationship with China and that he planned to deal with current relations from a "comprehensive perspective", Japan's Jiji news agency reported.
China's state television broadcaster, CCTV, reported that Hu told Noda a "severe situation" had developed over the islands which are controlled by Japan and owned by a Japanese family.
China is angry about a plan by Noda's government to buy the islands, which are near potentially significant offshore gas fields. CCTV said Hu had raised objections to the purchase.
"It is illegal and invalid for Japan to buy the island via any means. China firmly opposes it," CCTV quoted Hu as saying.
"China will unswervingly safeguard its sovereignty. Japan must realize the severity of the situation and not make a wrong decision."