China and Japan: Tensions continue rising; economic ties impacted

Updated On: Jan 10, 2013

Tensions between China and Japan continue to rise, with Japan scrambling fighter jets to head off a Chinese state-owned plane flying near disputed islands on Saturday, and the Japanese government on Tuesday summoning Chinese ambassador to protest the presence of Chinese government ships near the islands. At the same time, the Japanese government announced plans to increase military spending, signalling the new conservative government's response against China.

Report: Japan scrambles jets to head off China plane [Channel NewsAsia, 5 Jan 2013]

Report: Japan protests over China ships near disputed islands [BBC, 8 Jan 2013]

The dispute has alarmed some analysts, with some suggesting that these developments are symbolic of a broader strategic mistrust. If the dispute is left to worsen, it may not necessarily trigger a full-scale war, but could lead to localised armed clashes. The national politics of both countries could further inflame tensions, with Japan's new Prime Minister, Shinzo Abe, known for his nationalistic views, and with China's new leader, Xi Jinping, unlikely to want to appear weak in the face of these disputes as he takes over the reins of leadeship.

Moreover, signs point towards a cooling of economic relations between the two countries, and the spat may in fact be prolonging a recession in Japan. Ever since Chinese began boycotting Japanese goods in response to the Japanese government's purchase of the disputed islands from private owners, Japanese exports have fallen sharply. Sales of Japanese cars in China have not yet recovered, Chinese factories have begun to prefer South Korean component suppliers and the US has replaced China as Japan's largest export market.

Mr Tony Nash, a Singapore-based managing director at research firm IHS, said, "The spats have become increasingly costly as Japan's dependence on China as an export market has risen." Indeed, some Japanese investors are beginning to look elsewhere in Asia, although a full pull-out from China is seen as unlikely.

Analysis: Japan boosts defence spending 'in response to China' [BBC, 9 Jan 2013]

Analysis: Rising economic toll in China-Japan dispute [Today, 10 Jan 2013]