The head of the International Monetary Fund is urging China and Japan to work to settle their diplomatic conflict over a group of islands in the East China Sea.

IMF Managing Director Christine Lagarde stressed in a news conference in Tokyo Thursday that bilateral cooperation between Japan and China is for the benefit of the global economy.

The remarks are seen as Lagarde's concerns for negative effects a prolonged territorial dispute between the world’s second and third largest economies will cause on the global economy.

Lagarde also expressed regret over the Chinese finance minister and central banker’s absence from annual meetings of the International Monetary Fund (IMF) and World Bank that opened in Tokyo on Tuesday.