The irony is that when the Japanese government purchased what the Japanese call the Senkaku Islands and the Chinese call the Diaoyu Islands, they believed that they were heading off trouble.
The alternative was to have a loose cannon in the form of Tokyo's arch-nationalist governor Shintaro Ishihara buy the islands and mount all sorts of provocations. Japan, however, ignored signals from China that this action would be considered provocative, including those heard at the September meeting between Chinese President Hu Jintao and Japanese Prime Minister Yoshihiko Noda.
China has called the purchase of the islands "totally illegal and invalid", even if it was connived at by Washington. China's number 2 –Premier Wen Jiabao-- stated that China would make no concession on matters affecting its sovereignty and territorial integrity.
China's official news agency Xinhua has ramped up the threats, warning that Japan "would have to bear full responsibility for whatever repercussions may arise." This is a thinly veiled threat of resort to military force.
Xinhua's editorial introduced another element into the dispute between the two countries. In other boundary disputes pitting China against other Southeast Asian countries, China relies on historic claims to the South China Sea.
In its relations with Japan, China frequently brings up the topic of Japanese aggression and atrocities in China from the late 19th century Sino-Japanese war continuing throughout World War II. The dispute with Japan is now part of the legacy of World War II and China claims that under the Potsdam Declaration of 1945, Japan was obligated to return all the territories seized illegally.
The above means that the dispute over the islands is now connected to one of the most highly charged issues in Sino-Japanese history, making it a matter of national honor for the Chinese that is not subject to negotiation.
In the interim, China has allowed anti-Japanese demonstrators a relative freehand ("Their feelings are perfectly understandable" explained the Chinese Foreign Ministry) and the Japanese Embassy in Beijing has issued warnings to Japanese citizens and businessmen to take precautionary measures.
Japanese participation in public and private events in China has been canceled as part of the anti-Japanese mood.