The two countries have been battling over five uninhabited islands, known as Senkaku by Japan and Diaoyu in China, in the East China Sea.
The fight over the islands has escalated since Japan bought three of the islands from their private owner last year.
Cabinet Secretary Yoshihide Suga's comments came as seven Chinese patrol ships entered waters around the islands, which is the latest of many incursions in the area, the Japanese coast guard said.
Japan also spotted a drone flying in the vicinity Monday.
Japan has not confirmed what country controlled the unmanned aircraft, but has approached China about the incident, The New York Times reported.
Suga said Tuesday Japan is prepared to make a calm response to defend its territory.
"Our country will never make a concession on the matter of sovereignty," he added.
Strategists have warned that an attempt to forcibly control the islands could lead to an escalation of the conflict, the Times said.
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