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There are two ways of answering this question.
In the short run, the cause of the tension between these two countries is control of various small islands in the East China Sea. These islands are important for two reasons, even though they are tiny and uninhabited. First, there may be all sorts of mineral wealth under the surrounding waters and both countries (along with Taiwan) would like to exploit that. Second, China wants to have control over the islands as part of its desire to control its own access to the open ocean. China feels that it is hemmed in by American-dominated (in their eyes) countries like Taiwan, the Philippines, and Japan. It wants to control these islands and others to allow it more of an ability to get naval forces out into the Pacific without having to pass through American-dominated territory.
In the long run, the conflict between China and Japan is largely driven by history. When Japan was becoming a world power, it did so at China’s expense. It defeated China militarily in 1894-5, forcing China to give Taiwan up to it. After World War I Japan started encroaching on China. It took the area that we now call Manchuria. Eventually, it invaded China proper. During WWII, Japanese forces committed some brutal atrocities in China. This history helps to cause the conflict as well since many Chinese continue to feel very bitter about it and because the Chinese government sometimes likes to play the history up to consolidate support through nationalism.
Thus, this conflict has an immediate cause and a deeper historical cause.
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