Japanese companies have closed down offices and factories in China after competing claims over which nation owns a group of islands in the East China Sea has escalated into violence.
The Americans have urged both parties to use restraint as the danger of an armed conflict grows nearer.
The Japanese government recently purchased Senkaku islands, known as the Diaoyu in China, from their private Japanese owners - a move that sent people to the streets in protest in more than 70 Chinese cities, the Guardian reported.
China sent marine patrol ships to the Japanese waters, while some sources claim that nearly 1,000 Chinese fishing boats were due to arrive in waters off the Senkakus this week.
US secretary of defence, Leon Panetta told reporters: "Obviously we're concerned by the demonstrations and we're concerned by the conflict that is taking place over the Senkaku islands, and the message that I have tried to convey is a message that we have to urge calm and restraint on all sides."
The Japanese embassy in Beijing as well as numerous Japanese restaurants and businesses across China have reportedly been attacked. Big name Japanese brands Toyota, Honda and Panasonics have stated that their plants and dealerships had fallen victim to arson attacks.
Japan has struck back by closing some of its factories in China. For example, Canon confirmed that three of its four Chinese factories would be shut down for at least two days.
Speaking to broadcaster NHK, Japanese prime minister, Yoshihiko Noda said: "Regrettably, this is a problem concerning the safety of Japanese nationals and Japan-affiliated companies.
"I would like to urge the Chinese government to protect their safety."
While the disputed islands are uninhabited, they are rich in resources and location. They were the focus of a large scale diplomatic row between the two nations in 2010.
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