Author's comments follow reports of Japanese books being banned in China in dispute over Senkaku, or Diaoyu, islands

The internationally acclaimed author Haruki Murakami has criticised the "hysteria" over an ongoing territorial row between Japan and China, accusing both countries of inflaming the situation by using nationalist rhetoric.

The long-running dispute over the Senkaku islands – known as the Diaoyu in China – intensified earlier this month after Japan nationalised the territories, resulting in violent anti-Japanese demonstrations in dozens of Chinese cities.

Murakami, who enjoys a huge following in China, could have been expected to criticise the authorities there amid reports that they had banned the sale of Japan-related books, including his own novels.

Instead, he called on Japan and China to wean themselves off the "cheap alcohol" of nationalism, as both sides refused to make concessions.

"When a territorial issue ceases to be a practical matter and enters the realm of 'national emotions', it creates a dangerous situation with no exit," Murakami wrote in a front-page opinion piece for the Asahi Shimbun.

"It's like cheap alcohol. It gets you drunk after only a few shots and makes you hysterical. It makes you speak loudly and act rudely … but after your drunken rampage you are left with nothing but an awful headache the next morning.

"We must be careful about politicians and polemicists who lavish us with this cheap alcohol and allow things to get out of control."

Murakami, Japan's best-known living author whose books have been translated into 40 languages, made the comments after Japan and China continued to trade verbal blows at the United Nations general assembly in New York.

China's foreign minister, Yang Jiechi, said China considered the islands "sacred territory" and accused Japan of theft after it bought them from their private owners – who are Japanese – in a bid to derail a similar, and potentially more provocative, move by the rightwing governor of Tokyo, Shintaro Ishihara.

The dispute risks souring diplomatic and trade ties between the world's second- and third-largest economies. Threats of a widespread boycott of Japanese imports have so far failed to materialise, although Japanese firms are reporting delays in processing paperwork for goods at Chinese ports.

Chinese employees of Japanese companies have staged walkouts, demanding higher wages; carmakers, including Toyota and Nissan, have said they will cut production in China in anticipation of a fall in demand.

"It's almost inevitable that many Japanese business leaders [with investments in China] will say that enough is enough," said Tomohiko Taniguchi, a former foreign ministry spokesman who now teaches at Keio University. "Wages in China are going up and other countries in the region, such as Burma, are looking more attractive. This dispute can only accelerate the business community's shift in another direction."

Tens of thousands of flight bookings from China to Japan have been cancelled through to the end of this month. It marks a dramatic reversal in fortunes for Japanese tourist authorities, who had issued a record number of visas to Chinese tourists between May and the latest eruption of the Senkaku dispute.

China has so far been the target of small demonstrations by Japanese ultra-nationalists, a few hundred of whom marched through Tokyo recently carrying banners calling for Chinese boats to be sunk and urging Japan's government not to give in to the "terrorists" in Beijing.

No ban exists on travel to Japan, but the Chinese media have devoted coverage to the demonstrations and isolated incidents, such as a smoke-bomb attack on a Chinese consulate in south-west Japan. They have also made much of a recent poll in which only 3% of Japanese said they liked China, while 38% said they disliked the country.

Opinion is divided on how much lasting damage a trade spat would inflict on the countries, whose bilateral trade ties were worth a record $345bn (£213bn) last year.

But the dispute has ruined what was supposed to be a weekend of celebrations this week to mark 40 years of diplomatic ties.

China abruptly cancelled a major event in Beijing to mark the anniversary, while Japan's prime minister, Yoshihiko Noda, and the Chinese premier, Wen Jiabao, did not exchange congratulatory messages.

About 40% of anniversary ceremonies due to be held in Japan were cancelled, according to Kyodo, with more than half called off at China's request.

The cancellations were a sign of the dispute's impact on people-to-people ties, said Duan Yuezhong, the chief editor of a magazine for Chinese people living in Japan. "We are working hard to promote private-level exchange, but our efforts have been spoiled. We feel helpless," he told Kyodo.

Murakami said he was disappointed by reports that bookshops in China had been ordered to remove works by Japanese authors, as well as those about Japan by Chinese writers.

The Beijing municipal bureau of press and publication has denied issuing the order, but there are widespread reports of shops clearing their shelves of books, including Murakami's bestselling trilogy 1Q84.

The row has also affected the Chinese music and art world. The pianist, Yundi Li, reportedly came under pressure from the authorities in Beijing to cancel a solo recital tour of Japan due to start last month and the Hong Kong-Chinese film, Floating City, has been withdrawn from the forthcoming Tokyo international film festival at the request of the producers.

Murakami urged Japan not to retaliate by, for example, banning Chinese books. "Here is what I'd say loud and clear," he wrote. "Please don't retaliate against China for taking such steps. If we do, it becomes our problem, and it will come back and hit you."