Japan, which shares a maritime border with China, said Beijing's military build-up was of global concern.
Japan will also strengthen its missile defences against the threat from a nuclear-armed North Korea.
The policy document has been approved by the cabinet and will shape Japan's defence policy for the next 10 years.
Japan is changing its defence policy in response to the shifting balance of power in Asia, analysts say.
Defences will be scaled down in the north, where they have been deployed since the Cold War to counter an invasion from Russia.
The military focus will now be in the far-southern islands of Japan, closer to China.
Japan is concerned by China's growing naval might and increased assertiveness in the East China and South China seas.
"China is rapidly modernising its military force and expanding activities in its neighbouring waters," the new guidelines said.
"Together with the lack of transparency on China's military and security issues, the trend is a concern for the region and the international community."
Relations between Japan and China deteriorated sharply in September, after collisions between a Chinese trawler and Japanese patrol boats near a chain of disputed islands in the East China Sea.
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