The uninhabited islets in the East China Sea, called Senkaku in Japan and Diayou in China, are currently held by private Japanese owners. Besides China, Taiwan also claims the islets and tensions have been rising as each asserts it sovereignty over them.
The proposal by the Japanese government to purchase the islands has been strongly opposed by China.
Japanese officials said their government is close to reaching a deal in acquiring the islets called Uotsuri, Kitakojima and Minamikojima from their private owners, Kyodo News reported.
"The state is currently leasing the islands, but the owner wants to sell them," Chief Cabinet Secretary Osamu Fujimura told reporters Monday, Kyodo reported. "We are discussing it from the standpoint of maintaining and managing the Senkaku Islands in a peaceful and stable manner."
The latest move comes after Japanese Prime Minister Yoshihiko Noda in July announced a plan to buy them for about $25 million. Prior to that the Tokyo metro government had offered to buy them using publicly donated money, Kyodo said.
The island issue has sharply escalated after Chinese activists and Japanese local assembly members made separate landings last month on Uotsuri to assert their sovereignty. Since then, the Japanese government turned down a request by the Tokyo government to land on the islets to conduct a survey.
Recently, China's official media quoted the Chinese Defense Ministry that its armed forces have the "confidence, capability" and unwavering determination to defend the islands. A ministry spokesman said the Chinese military is closely watching Japan's moves.