A top U.S. diplomat painted an alarming picture of the standoff between China and Japan over a group of islands in the East China Sea that the two countries contest, noting there had been "an unprecedented spike in risky activity" by Chinese maritime agencies.

"We remain concerned about the serious downturn in China-Japan relations," said Daniel Russel, assistant secretary of state for East Asian and Pacific Affairs in Congressional testimony Wednesday. He urged the two countries to "lower tensions,...