BEIJING (Reuters) - China's state-owned banks will not attend the annual meetings of the IMF and World Bank to be held in Tokyo starting Tuesday, state news agency Xinhua said on Monday, the latest sign that a territorial dispute has strained ties between Asia's two biggest economies.

The four Chinese lenders that have pulled out of International Monetary Fund-related events are the Industrial and Commercial Bank of China (ICBC), Bank of China, China Construction Bank and Agricultural Bank of China, Xinhua said.

The Wall Street Journal reported last week that Bank of Communications will not attend the events either.

"The banks' decision is further evidence that the unilateral actions by Japan is freezing bilateral relations and now starting to weigh on the world's economy," Xinhua cited Mei Xinyu, a researcher at the International Trade and Economic Cooperation Institution under China's Ministry of Commerce, as saying.

Japan is scheduled to host the IMF and World Bank annual meetings for the first time in nearly half a century. About 20,000 people are expected to attend the event, making it one of the world's largest international conferences.

Sino-Japanese relations deteriorated sharply after Japan in September bought the East China Sea islets that both Tokyo and Beijing claim, sparking anti-Japan protests across the country.

The disputed group of islands, called Senkaku in Japan and Diaoyu in China, are located near rich fishing grounds and potentially huge oil and gas reserves. Taiwan also asserts its own sovereignty over the islets.

China has sent its patrol ships into what Japan considers its territorial waters near the islands in recent weeks, prompting Japan to lodge protests against China.

Japan's Toyota Motor Corp, Nissan Motor Co and Honda Motor Co plan to slash production in China by roughly half, the Nikkei newspaper reported on Monday, as the dispute cut sales of Japanese cars in the world's biggest auto market.

(Reporting by Sui-Lee Wee; editing by Ron Askew)