Japan has confirmed it has indeed purchased Senkaku island (known in China as Diaoyu) Tuesday according to BBC News.
The disputed island has been rented out to the government by the private Japanese owner who also occupies some of the smaller islands near Senkaku.
The Japanese government reportedly purchased the island from Kurihara family, a private Japanese owner for $26.2 million.
China maintains the sale was "illegal and invalid", saying its claim goes back hundred of years but in a survey of 1885, Japan claims there was no trace of Chinese control and it was recognized as Japanese territory in 1895.
In a lengthy statement by the Chinese Foreign Ministry
, China emphasized that it will not allow intrusion in its territory.
"Long gone are the days when the Chinese nation was subject to bullying and humiliation from others," it said. "The Chinese government will not sit idly by watching its territorial sovereignty being infringed upon," the statement said
"Should the Japanese side insist on going its own way, it shall have to bear all serious consequences arising therefrom." it added.
Chinese Premier Wen Jiabao said Monday the the islands are parts of the Chinese territory and China will make no concession on the issues.
"The Diaoyu islands are an inalienable part of China's territory, and the Chinese government and its people will absolutely make no concession on issues concerning its sovereignty and territorial integrity," he said.
Japan tried to downplay the takeover of ownership of the disputed island saying it is nothing but a regular real estate transaction
Chief Cabinet Secretary Osamu Fujimura said Japan does not want the issue to affect its bilateral relations with China.
"Both governments have been communicating closely through diplomatic channels to avoid misunderstandings and unforeseen incidents," he said.
The disputed areas consist of at least five islands and three reefs which are also being claimed by Taiwan.
China is also claiming the whole of South China Sea including occupied territories in the West Philippine Sea.