Sino-Japanese relations have been in another volatility cycle since the Diaoyu/Senkaku Islands disputes flared up again in summer 2012. The downward trend seems to have bottomed out in November 2014 when the two leaders Xi Jinping and Abe Shinzo finally held their first meeting since entering office. However, the anticipated recovery has proved tenuous; the momentum toward further improvement has halted since early 2016 when confrontation escalated in both the South China Sea and East China Sea. While acknowledging the role of realist power shift and geostrategic rivalry in causing Sino-Japanese tension, this paper argues that a widening gap between their national identities is also highly relevant. The current Xi government has promoted a national reinvigoration campaign emphasizing Chinese history and culture, the socialist model, and defense of core interests, which runs counter to that of Abe’s Japan, a democratic and historically revisionist country. This national identity conflict has exacerbated mutual distrust, denied chances of reassurance, and generated domestic popular objections to diplomatic compromise between the two countries.