The events on Tuesday in the East China Sea, which took place near an island chain claimed by both nations, have soured ties between the Asian giants, with Beijing warning of a "serious impact" on relations if the situation is not resolved.
Chinese foreign ministry spokeswoman Jiang Yu said Beijing had decided to postpone a second round of talks with Japan on the East China Sea, scheduled for mid-September, as part of its response to the dispute, state-run Xinhua news agency reported.
The move came after China summoned the Japanese ambassador on Friday for a third time, with Foreign Minister Yang Jiechi reiterating Beijing's demand that the captain and crew of the fishing boat be released "unconditionally", the ministry said in a statement.
Yang "emphasised that the Chinese government's determination to safeguard the sovereignty of the Diaoyu islands and the nation's people is firm and steadfast", his ministry said.
Announcing the postponement of talks, Jiang said China expressed "strong discontent and grave protest" at the treatment of the trawler captain.
"The Japanese side has ignored China's repeated solemn representations and firm opposition, and obstinately decided to put the Chinese captain under the so-called judiciary procedures," Jiang said, quoted by Xinhua.
"Japan's acts have violated the law of nations and basic international common sense, and are ridiculous, illegal and invalid.
"Japan will reap as it has sown, if it continues to act recklessly," Jiang warned.
The uninhabited islands -- known as Senkaku in Japan and Diaoyu in China -- lie between Japan's Okinawa island and Taiwan. They are claimed by Tokyo, Beijing and Taipei and are frequently the focus of regional tensions.
On Thursday, Jiang said a Chinese "law enforcement" ship had been sent to the area to "protect the safety" of the fishermen working there.
The boat's captain, 41-year-old Zhan Qixiong, was arrested Wednesday on suspicion of obstructing officers on duty -- a charge that carries a maximum sentence of three years' imprisonment. The crew is in detention.
Tokyo suspects the captain deliberately rammed the two Japanese vessels in a confrontation near the disputed island chain which began on Tuesday morning, and ended after four Japanese patrol boats pursued the Chinese trawler.
A Japanese court on Friday gave its approval for prosecutors to keep the Chinese captain in detention for up to 10 more days, until September 20, Japan's Sankei Shimbun daily reported.
Under Japanese law, suspects can be held without charge for an initial three days, and this can be prolonged twice for 10 days each with court approval, meaning a suspect can be held for 23 days before they are indicted or freed.
Japanese Foreign Minister Katsuya Okada expressed his displeasure at the way the Chinese press has reported the incident.
"In China, it has been reported that the Chinese fishing boat was hit by Japan's patrol ships, which contradicts the facts. It's extremely regrettable," he told reporters as quoted by Jiji Press.
"I hope that this incident won't escalate further. I would like to ask China to handle this calmly and carefully," he said.