Leon Panetta, the US defence secretary, has called for “calm and restraint” amid an increasingly bitter Sino-Japanese dispute over a contested island chain in the East China Sea, warning that tensions could develop into a regional conflict that could draw in the US.

Speaking in Tokyo, Mr Panetta said the US did not take sides on competing sovereignty claims. But he said that Washington expected a peaceful resolution to the spiralling dispute over the Japanese-controlled Senkaku Islands, which are also claimed by China and Taiwan. “It is in everybody’s interests – everybody’s interests – for Japan and China to maintain good relations and to find a way to avoid further escalation,” Mr Panetta said on the first leg of a week-long tour of Asia.

Mr Panetta, flanked by Japanese defence minister Satoshi Morimoto, also said on Monday that the two sides had agreed to locate a second anti-ballistic missile radar in Japan to thwart a potential attack from North Korea, a move he said need not upset Beijing.