Japan may have to scrap plans to build an early warning base for its Self-Defence Forces on the Okinawan island of Yonaguni after the local government put an exorbitant price on the land required for the facility.
Yonaguni was chosen late last year as the site of the new base, which would house about 200 troops and be designed to monitor foreign aircraft and shipping in waters close to the disputed Senkaku Islands, which China claims as the Diaoyu Islands.
Tensions in the area remain high, with Chinese ships operating in and around waters that Japan claims as its territory.
On Monday, three Chinese maritime surveillance vessels entered Japan's territorial waters around the islands and remained for five hours, said the coastguard headquarters in Naha, Okinawa.
The intrusion was the first since March 18, officials said, and was the 35th time Chinese ships entered Japanese waters since Tokyo bought three of the islands in September.
The Yonaguni unit would provide advanced warning to aircraft of Japan's Air Self-Defence Forces to enable them to scramble earlier from their bases and respond to any threats.
But that plan is under threat, although the Sankei newspaper said officials of Japan's Ministry of Defence were now looking at other sites for the base, with Ishigaki Island seen as an option.
Reports suggested that the ministry offered in early March to pay 100 million yen (HK$8.07 million) for the site on Yonaguni. The mayor, Shukichi Hokama, responded by asking for 1 billion yen, claiming it would cover the inconvenience to local residents.
He later described the payment as "municipal co-operation fees".
Defence Minister Itsunori Onodera dismissed the price and said officials would devise an alternative plan if they could not win the mayor's understanding.
The project's delay would be an embarrassment to Tokyo, which expected island residents - most likely to be impacted by any conflict over the Senkakus - to have been more willing to assist.
Japanese papers leaked in January show that Tokyo feared that China's efforts to wrest control of the islands were merely one part of Beijing's larger territorial ambitions.