Taiwanese fishermen and coastguard vessels came under attack with water cannon from the Japanese on Tuesday when they attempted to enter disputed territorial waters around what Japan calls the Senkaku islands.
Around 40 fishing vessels and eight coastguard launches were turned away, and Tokyo now says they have all left the area.
Although the two countries have friendly relations the islands are a bone of contention, even more so since the Japanese government bought them last week from their private owner.
That led to a sharp protest from Beijing, which insists the islands are Chinese. Chinese ships also entered the waters yesterday, and since the purchase the pair have been in high-level talks to try and defuse tensions.
On Tuesday the Chinese announced they would "never tolerate any unilateral actions by Japan". It also marked the day the first Chinese aircraft carrier, a refurbished Ukrainian vessel, entered service after sea trials.
There has been a wave of anti-Japanese protests in China, with campaigns to boycott Japanese goods, and attacks on shops and car dealers, which led last week to some Japanese firms in China suspending activities.
