Japan has accused China of breaking the terms of an agreement signed in June over natural resources in the East China Sea.
Both sides are competing to exploit the gas and oil beneath the seabed in an effort to reduce their reliance on increasingly expensive imports from politically unstable regions of the world.
Chief Cabinet Secretary Takeo Kawamura said, "The Japanese government has conveyed that such unilateral development by the Chinese side is unacceptable and regrettable. We have lodged protests over the matter."
In an understated criticism of Beijing, Mr Kawamura described the situation as "regrettable."
Tokyo believed it had secured an agreement last year for Chinese and Japanese companies to jointly explore for oil and natural gas deposits in the disputed areas and then extract the fuel for domestic consumption.
Local media has revealed, however, that Tokyo has issued a series of official complaints after learning that Chinese companies were unilaterally drilling. Although they are to the west of the demarcation line, Tokyo claims the Chinese are extracting reserves from beneath the seabed on the Japanese side of the border.
The area, known as Tianwaitian by China and the Kashi Field in Japan, is believed to contain the equivalent of 92 million barrels of oil, but further reserves may yet be located.
China has dismissed Japan's complaints, with a statement released by the Foreign Ministry in Beijing claiming, "Gas fields such as Tianwaitian are located in waters controlled by China that are not under dispute.
"China's development activities in such gas fields constitute the exercising of its sovereign right."
Japan's Ministry of Economy, Trade and Industry has been monitoring the Chinese progress, with patrol aircraft noting the delivery of long pipes to drilling rigs in the area and discoloured water bubbling to the surface, according to Shin Hosaka, director of the Petroleum and Natural Gas Division.
"We believed we had reached an agreement with the Chinese regarding joint exploration and development of these resources and we were planning further discussions on the details," he said. "But we now have evidence that the Chinese are going ahead already.
"The Chinese government has said that what it is doing is legal, but the Japanese government does not agree," he said. "We have again proposed to the Chinese side that we jointly explore for resources but we have not heard back from them yet."
Prior to last year's agreement, both sides had deployed patrol vessels and reconnaisance aircraft in the region and there were concerns that clashes might occur along the disputed boundaries.