Taiwan President Ma Ying-jeou Wednesday ordered an investigation into the navy's decision to punish a senior officer for sailing too close to a Japanese-held island in a recent drill.

Rear Admiral Chang Feng-chiang received a demerit, was transferred and will face a court martial in the case, which has caused critics to attack the top brass for seeking to please Japan.

"The defence ministry must conduct a thorough investigation into the case and fully inform the public," Ma said, according to his spokesman Fan Chiang Tai-chi.

In the drill on July 26, Rear Admiral Chang led a force of three vessels to within 21.2 kilometres (13.2 miles) of Japan's Yonaguni, an islet some 110 kilometres east of Taiwan.

Chang claimed that he was testing a scenario linked to a hypothetical war in the Taiwan Straits, but the navy insisted he had violated the rules.

Lawmakers and local media blasted the navy's decision, saying it "made a fuss over the event" in order to make Japan happy, an allegation rejected by Taiwan's defence ministry.

The three vessels' manoeuvres prompted the Japanese military to send a surveillance plane but did not draw a protest from Tokyo, according to Taiwan's defence ministry.

Defence Minister Kao Hua-chu agreed to review the event and the punishment given to the rear admiral.

The event occurred amid mounting tension over a disputed island chain in the East China Sea, known as Senkaku in Japan, Diaoyu in China and Diaoyutai in Taiwan.

Last month, coastguard vessels from Taiwan and Japan "bumped into" each other in waters near the disputed island chain, as the Taiwanese vessel was escorting activists to the area.

Tensions between Beijing and Tokyo rose at the same time after Chinese vessels twice entered waters near the resource-rich islands.

Japan lodged two formal complaints with Beijing and summoned the Chinese ambassador in protest, and Japanese Defence Minister Satoshi Morimoto warned Tokyo could send troops to the disputed island.