A group of Japanese business leaders that has met top Chinese politicians regularly over 37 years will cancel this year's trip, an official said Monday, amid a degenerating territorial spat.

The Japan-China Economic Association, one of seven Japan-China friendship organisations that were scheduled to attend the ceremony marking the 40th anniversary of ties on Thursday, said it will cancel a trip to China by its business delegation of 175 company officials.

But its chairman Fujio Cho, who is also Toyota Motor chairman, will attend a dinner on Thursday in Beijing to meet with China's former foreign minister Tang Jiaxuan, said association official Takahiro Miyahara.

Hiromasa Yonekura, chairman of Japan's powerful business lobby the Keidanren (Japan Business Federation) and chairman of Sumitomo Chemical, will accompany Cho and attend the dinner "as one of China's old friends", said Miyahara.

"It's very regrettable that our delegation had to cancel the whole trip to China," he said.

The group had been set to meet Chinese leaders including Premier Wen Jiabao, but last week decided to shorten their trip due to safety concerns following anti-Japanese demonstrations over Tokyo's nationalisation of disputed islands.

The association has been sending senior Japanese business officials to China since 1975. In the past the delegation has met figures including President Hu Jintao and former president Deng Xiaoping.

China and Japan have close economic and business ties, with two-way trade totalling $342.9 billion last year, according to Chinese figures.

But the two countries' political relationship is often tense due to the territorial dispute and Chinese resentment over past conflicts and atrocities.

Tensions over the Japanese-controlled Senkaku islands, which China claims under the name Diaoyu, escalated dramatically after the Japanese government bought three of them from their private owners earlier this month.

Demonstrations targeting Japanese businesses in cities across China led to warnings of damage to the multi-billion dollar economic relationship between the two countries.

Chinese state media said on Sunday that events celebrating the 40th anniversary of the establishment of diplomatic ties between China and Japan would be "postponed".