The Japanese Coast Guard says three Chinese government ships have entered the waters near a hotly disputed island chain in the East China Sea.
In a statement Wednesday, the coast guard says the Chinese ships ignored warnings from Japanese patrol vessels and sailed near the Tokyo-controlled islands. It says the Japanese ships are demanding that the Chinese vessels leave the area, but have not yet received a reply.
Beijing has vowed to continue conducting what it says are routine patrol missions near the islands, which it says are part of Chinese territory. Tensions between China and Japan have risen after Tokyo purchased some of the rocky islets from their private Japanese landowner last month.
In remarks published Wednesday, Lagarde says she cannot confirm reports that Chinese state-owned banks have pulled out of an annual IMF meeting scheduled for next week in Tokyo.
Wednesday's Wall Street Journal quotes an unnamed Chinese bank official as saying that deteriorating Sino-Japanese relations have led the Chinese banks to cancel their participation in the summit.
There have been fears that the island dispute, which is partly complicated by long-standing tensions and nationalist sentiment in both countries, could damage the crucial trade ties between Asia's two largest economies.
Several Japanese businesses, including major car makers such as Toyota and Nissan, have cut production following sometimes violent anti-Japan protests that broke out last month across China.
The islands, known as Senkaku in Japan and Diaoyu in China, are surrounded by rich fishing grounds and potential energy deposits.