"It is an obstacle in bilateral relations at present and we hope Japan will take concrete actions to eliminate the obstacle," foreign ministry spokeswoman Jiang Yu told reporters.
"Japan should return the captain immediately to avoid further detriment to bilateral relations."
Japan's embassy and consulates in China issued a warning to its citizens in the country to watch their words and actions so as not to provoke Chinese after nationalistic protests and reports of vandalism at a Japanese school.
The diplomatic spat broke out last week when Japanese authorities arrested the captain of a Chinese fishing boat after it collided with two Japanese patrol boats near islands in the East China Sea claimed by both countries.
The 14 crew members and the trawler have returned to China. But the captain remains in Japanese custody and could face prosecution for obstructing the coast guards' public duties – triggering harsh criticism from Beijing.
Beijing has said the confrontation could damage its relations with Japan and has summoned Ambassador Uichiro Niwa five times, underlining the sensitivity of the territorial dispute. The incident has also led to protests in Taiwan, which also claims the islands, called Senkaku in Japanese and Diaoyu in Chinese, which are located 120 miles (190 kilometers) east of Taiwan.
Last week, in a sign of its anger, Beijing postponed talks with Japan on contested undersea deposits in the East China Sea. The talks would have been the second meeting over gas exploration related to the territorial dispute.
Mr Kan's predecessor had met with Chinese premier Wen Jiabao at last year's General Assembly, and leaders of the two nations usually meet at international gatherings. So while it was assumed Kan and Wen would meet, no meeting or agenda had been set.
"At the moment, nothing has been decided, as neither side is making a move to set up (a meeting)," Sengoku said. He cited "the problem involving the Senkaku," as part of the reason why both sides are not arranging talks. He also cited scheduling conflicts on both sides.
"We have not received any request from China, either," he said.
Japan urged its citizens in China to "take full caution" for the time being, especially on Saturday, a sensitive day marking the anniversary of the 1931 "Mukden Incident" that led to the Japanese occupation of China's northeast.
"Watch your words and behavior when you have contact with the Chinese people," the embassy said in a safety notice posted on its Web site. "Refrain from making a scene in a Japanese-only group or other provocative acts."
Last week, a few dozen people gathered in front of the Japanese embassy in Beijing to shout slogans and wave flags. Such protests usually occur only with the approval of local police or officials.
Vandalism was reported Sunday at a Japanese school in Tianjin, with graffiti painted on the wall. A Japanese school in Beijing said it has decided to postpone a sports event scheduled for Saturday until October.
During times of periodic tension between the two countries in the past, Japanese schools, stores, restaurants and diplomatic installations in China have been attacked.
Japan stepped up its presence over the disputed islets, with Transport Minister Seiji Maehara inspecting patrol boats on Ishigaki, a Japanese island near the disputed islets, on Thursday. He also visited coast guard personnel to praise their effort to seize the captain.
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