The United States -- rival to one power, ally to the other -- finds itself walking a tightrope, with Vice President Joe Biden in China this week urging restraint to "reduce the possibility of crisis or mistake", according to a US administration official.
But that is hard when relations between Asia's two biggest economies are so poisoned by history. Every time Beijing summons the demons of
"This is a battle about pride," said Takehiko Yamamoto, international security professor at Japan's Waseda University. "I cannot, for now, see there being any compromises."
Simmering tensions heated up with Japan's September 2012 purchase of some of the Tokyo-controlled Senkaku islands, in the East China Sea, from their private Japanese owners. China, which calls them the Diaoyus, regards them as its territory.
Since then, China has sent ships and aircraft into the area on scores of occasions, prompting counter-deployments by Japan, and last month Beijing declared an Air Defence Identification Zone (ADIZ) covering a large stretch of the East China Sea.
Japan already has an ADIZ, which now overlaps China's. In October, a Chinese drone flight prompted Japanese threats to shoot down unmanned aircraft that enter its airspace, something Beijing said would amount to "an act of war".
Each escalation is blamed on the other side, with Japan claiming China is trying to "forcefully change the status quo", and China saying it must stand up to a re-emerging militarism it sees in Japan under conservative Prime Minister Shinzo Abe.
Abe's bid to stoke Japan's slumbering economy has given him political capital to push his long-cherished aim of also rehabilitating Japan's military, which under the post-war pacifist constitution is restricted to defence only.
Abe has used the tense diplomatic situation "cleverly" to manage his government, said Tomoaki Iwai of Nihon University, painting each Chinese action as a crisis and promoting policies that might otherwise be unpopular among a populace deeply wedded to peace.
"Mr Abe has not directly provoked China. He has been waiting for the other side to give," Iwai said.
'No scope for optimism'
Fears about China have opened the door for Abe to boost Japan's defence budget for the first time in 11 years -- albeit by a small fraction of the double-digit rises enjoyed by China's armed forces over the past decade.
Abe has also established a US-style National Security Council, which came into operation Wednesday and is expected to bolster the power of the premier and a handful of senior ministers. China plans a similar body, although details remain scant.
Beijing's declaration of its own air defence zone was largely a response to the way it thinks Japan has "exaggerated the threat of China", said Jin Canrong, a professor of international relations at Renmin University in Beijing.
China's ruling Communist Party regularly seeks to bolster public support by tapping into deep-seated resentment of Japan for its brutal invasion of the country in the 1930s.
The island sovereignty row is portrayed in China as righting a historical injustice.
Beijing says the islands -- believed to harbour vast natural resources below their seabed -- were its possessions for hundreds of years before Japan stole them at the close of the 19th century.
Japan's nationalisation move was greeted by sometimes-violent protests on Chinese streets, a consumer boycott of Japanese goods, and an outpouring of anti-Japanese sentiment which refuses to fade.
"Little Japan is a mean and shameless country," wrote one user on a Twitter-style weibo site on Thursday. "Die little Japan," added another.
These hardened attitudes sometimes play into Beijing's actions.
Its relatively benign response to initial overflights of the ADIZ by Japan and the US -- China said it had "monitored" the incursions -- was lambasted by the domestic media and online.
When Japan next flew planes over the area, China sent up fighter jets.
Jin at Renmin University said China, which has blown past once-mighty Japan to become the world's number-two economy, is proving a point with the new defence zone: it is a force to be reckoned with.
"Now China is really confident about itself," he said.
A conventional solution for taking the heat out of a geopolitical squabble -- one that Biden alluded to while visiting Tokyo this week -- is to establish a hotline, like the one that links Beijing and Washington.
But frayed relations mean even talking about such a crisis-management tool is off the table for now.
"The Abe administration will never back down. Neither will China," said Yamamoto of Waseda University.
"There is no scope for optimism in the immediate future."
