The proposal, which Ishiba described as "essential to deter China," was unveiled in a commentary for a U.S. think tank shortly before he assumed office on Oct. 1.
Chinese Defense Ministry spokesman Wu Qian said on Tuesday that Japan has "hyped up a non-existent 'China threat' to divert the international community's attention."
He added that Japan should "do more things that are conducive to maintaining regional peace and stability."
The idea of an "Asian NATO" has faced skepticism both within Japan and abroad. Ishiba appears to have downplayed the controversial proposal as Japan prepares for a general election scheduled for Oct. 27.
Wu also accused Tokyo of exceeding constitutional limits on its military capabilities in recent years, raising concerns among its Asian neighbors.
Meanwhile, Ishiba has directed his Liberal Democratic Party (LDP) to form a committee to discuss the Asian NATO concept after the upcoming election.
