This article contributes to the relational IR literature on identity politics and Sino‐Japanese relations. Theoretically, we develop Rumelili's framework for studying modes of differentiation by incorporating the sectoral characteristics of key discourse signs. Empirically, we apply this framework to the construction of Self and Other in the official Japanese security discourse regarding the Senkaku Islands dispute from 2010–2014, a period of dispute climax that is meaningful for studying the (re)production of Japan's understanding of China. The inclusiveness of the discourse signs that Japan uses to construct China possibly opens up for a positive evolution of Sino‐Japanese relations, as there is space for progress if China's behavior—and Japan's interpretation of it—proves to be more peaceful, transparent, and law‐abiding. The findings also suggest, however, that the strong sense of superiority in Japan (and China) vis‐à‐vis a subordinate Other may not bode well for Sino‐Japanese relations.