18 October 2012 Last updated at 18:35 ET
China, Japan and Taiwan all claim the islands, called Senkaku in Japan and Diaoyu in China.
Japan's recent acquisition of them from a private Japanese owner sparked violent protests in China.
Naval ships and vessels from the marine surveillance agency and fishery administration would be involved in Friday's exercises, Xinhua reported, citing a naval statement.
The presence of marine surveillance ships and fisheries patrol vessels near the islands in recent weeks has heightened tensions.
Cherish the relationship? Japan's Foreign Minister Koichiro Gemba says his government's decision to purchase the islands was pragmatic.
"The situation could have been much worse, if the government didn't buy the islands," he told the BBC.
Mr Gemba blamed Tokyo's right-wing governor, Shintaro Ishihara, saying his original plan to buy the islands had been much more provocative.
While he emphasised Japan's sovereignty over the islands, Mr Gemba said it was crucial for both countries to prevent the situation escalating further.
"Our economies are interdependent and we want to cherish the mutually beneficial relationship," he said.
Last month, Japan and China traded barbs at the United Nations over the islands, with China accusing Japan of stealing them and Japan reiterating its territorial claim.
The row has also seen a ceremony meant to mark Sino-Japanese ties cancelled and a number of Japanese businesses briefly halt production in some Chinese cities because of protests.
It comes at a time when both countries are facing political changes domestically, making it difficult for either side to be seen as backing down.
China is set to conduct naval exercises in the East China Sea, state media report, amid heightened tensions over islands disputed with Japan.
They are aimed at "sharpening response to emergencies in missions to safeguard territorial sovereignty", said Xinhua.China, Japan and Taiwan all claim the islands, called Senkaku in Japan and Diaoyu in China.
Japan's recent acquisition of them from a private Japanese owner sparked violent protests in China.
Naval ships and vessels from the marine surveillance agency and fishery administration would be involved in Friday's exercises, Xinhua reported, citing a naval statement.
The presence of marine surveillance ships and fisheries patrol vessels near the islands in recent weeks has heightened tensions.
Cherish the relationship? Japan's Foreign Minister Koichiro Gemba says his government's decision to purchase the islands was pragmatic.
"The situation could have been much worse, if the government didn't buy the islands," he told the BBC.
Mr Gemba blamed Tokyo's right-wing governor, Shintaro Ishihara, saying his original plan to buy the islands had been much more provocative.
Japan-China disputed islands
- The archipelago consists of five islands and three reefs
- Japan, China and Taiwan claim them; they are controlled by Japan and form part of Okinawa prefecture
- The Japanese government signed a deal in September 2012 to purchase three islands from Japanese businessman Kunioki Kurihara, who used to rent them out to the Japanese state
- The islands were the focus of a major diplomatic row between Japan and China in 2010
- That may be hard to believe, says the BBC's Japan correspondent Mariko Oi, as the wave of demonstrations in China crippled Japanese businesses and disrupted business with Japan's largest trading partner.
"Our economies are interdependent and we want to cherish the mutually beneficial relationship," he said.
Last month, Japan and China traded barbs at the United Nations over the islands, with China accusing Japan of stealing them and Japan reiterating its territorial claim.
The row has also seen a ceremony meant to mark Sino-Japanese ties cancelled and a number of Japanese businesses briefly halt production in some Chinese cities because of protests.
It comes at a time when both countries are facing political changes domestically, making it difficult for either side to be seen as backing down.
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