Japan is a narrow strip of water neighbors to China. Sino- Japan relation is one of the most complex bilateral relations in the world today, especially after entering 21ˢᵗ century, tensions have risen to more dangerous situation between China and Japan over a small group of uninhabited islands, which called Senkaku islands in Japan and Diaoyu Islands in China. Since 2010, a Chinese fishing trawler rammed two Japan Coast Guard vessels in waters near the Senkaku /Diaoyu Islands and Japan detained the captain, a territorial dispute has become an important topic between China and Japan. However, until September 2012, Japanese Prime Minister Yoshihiko Noda announced his government’s decision to purchase these disputed islands, so it has wantonly violated and trampled on the sovereignty of China. So the Diaoyu/Senkaku islands dispute has become extremely sensitive topic between China and Japan. This paper presents an analysis of this territorial dispute between the two most important economies in Asia, It seeks to answer the questions: will China clash with Japan over this territorial dispute? Why does this conflict happen at this time? What factors will intensify bilateral contradiction? And standing on the realism theoretical framework, what extent will make bilateral core interests clash? Data on trade and economic situation, military development situation and rise of China, it shows from Japanese domestic national reasons, Japan has suffered financial crisis and natural disaster in recent years, and national background of the rampancy of the Japanese new right-wing forces, security dilemma seems to be important factors for Japan. At the same time, Japan tried to defect to the United Sates, US-Japan alliance is probably becoming a threat of peace and stable environment of East Asia, US returning to Asia will become another important factors in the research. Besides these, reviewing Sino-Japanese relations is also useful for deepen the background analysis. At the last part, it tries to do a brief forecast for Sino-Japanese relations in the future.