In a narrow fight over the Senkaku Islands, I think Japan has the advantage, mostly because I think their small but good quality air force can defeat the Chinese in all but the longest conflict where China can lose lots of older aircraft to wear down the Japanese through attrition.
But China won't have a quality deficit nearly as big if current trends continue:
American air power planners (air force and navy) are scrambling to adapt to the fact that China is creating a Western style air force, not just with modern aircraft, but with modern training methods and tactics as well. While China has only about 500 modern aircraft (comparable to the American F-15/16/18/22), it’s their improved training that is most worrisome. The U.S., Taiwan, Japan and South Korea have over five times as many such aircraft and well trained pilots. China, however, is rapidly closing the gap. In another decade or so, China will have at least two thousand modern warplanes and, if they keep at it, pilots close to the capability of their Western counterparts.
An effective air force is more than just good aircraft and trained pilots. You need a system of training, logistics, maintenance, aerial refueling, communications, command-and-control, planning, reconnaissance, and strike analysis--all meshed by experienced staffs--to wield air power effectively. But good planes and trained pilots are certainly the building blocks to create an effective air force.
Potential foes of China need to react now to the future Chinese air force that is being built right now to shield Chinese power projection forces and conduct power projection missions of its own.