Defence Minister Onodera suggested Japan may station troops on other islands
Japan has begun construction work on a military radar station near a string of islands that is at the centre of a territorial dispute with China.
Correspondents say the move will anger Beijing as it may allow Japan to expand surveillance near the Chinese mainland.
The new base - on Yonaguni island- is located just 150km (90 miles) from the Japanese-held Senkaku island group, claimed by China as the Diaoyu islands.
About 150 personnel are due to be deployed on Yonaguni within two years.
During a ceremony to mark the start of project, Japanese Defence Minister Itsunori Onodera suggested his country's military presence could be extended to other islands in the region.
"This is the first deployment since the US returned Okinawa [in 1972] and calls for us to be more on guard are growing," Onodera told reporters.
"I want to build an operation able to properly defend islands that are part of Japan's territory."
Tensions between Japan and China rose last year, after Beijing imposed an Air Defence Identification Zone above disputed islands in the East China Sea - including the Senkakus.
The move was also condemned by the US.
Several countries claim competing sovereignty over islands, reefs and shoals in the South China Sea.