Japan's Land and Transport Ministry also plans to build a helipad on a manmade structure just off Okinotorishima, two islets about 1730km southwest of Tokyo, during maintenance work in June, said Katsunori Kadoyu, a ministry official in charge of the islands.
China says Okinotorishima are only rocks - not an island governed by rules of sovereignty - and therefore cannot be used by Japan to extend its economic zone while preventing Beijing from exploiting the natural resources in the surrounding Pacific Ocean area.
Ministry workers will build a 1m by 1.5m rectangular billboard on one of the two islets, declaring in Japanese: "Okinotorishima, Japan's southernmost island... Managed by the Ministry of Land, Infrastructure and Transport."
Kadoyu said the move was not meant to challenge China.
The ministry will also install a weather radar on top of an existing structure straddling the outposts to collect wave patterns and other meteorological data. It will also monitor ships within Japan's territorial waters.
"Okinotorishima, Japan's southernmost island... Managed by the Ministry of Land, Infrastructure and Transport"
Billboard to go up on Okinotorishima
A dispute developed between Tokyo and Beijing over the islets late last year after a Chinese research ship twice came within 370km of the crags, triggering a diplomatic protest by Japan.
China said the ship was conducting scientific exploration on the "high seas".
The latest plan follows violent riots across China last month after Tokyo approved new history textbooks which critics say whitewashes Japan's wartime atrocities.
Japan demanded an apology and compensation for damage to its embassy and Japanese companies, but China refused, saying it was Tokyo that needed to apologise for not owning up to its wartime actions.
The two countries are also sparring over competing claims to oil and natural gas reserves in the East China Sea.
As attention on the islets increases, dozens of people have started moving their permanent address there.
As of early May, about 50 people list the islets as their permanent address, according to Kyohei Asata, an official at Tokyo's Ogasawara Village, which has jurisdiction over Okinotorishima.
Outspoken Tokyo governor Shintaro Ishihara said he planned to visit the islets later this month to investigate how to promote economic activity there.