Japan will participate at an "unprecedented" level in a large-scale U.S.-led military exercise in California later this month, as it seeks to further strengthen coordination with its main ally and its ability to mount an amphibious assault aimed at capturing isolated island territory.

The move is likely to anger China considering the ongoing tensions between Tokyo and Beijing over disputed islands in the East China Sea, a dispute that has shaken both economic and political ties. It also shortly after leaders from...