Japan-China Row Over Taiwan Threatens Economic Ties
A diplomatic confrontation between Japan and China over Taiwan has escalated rapidly, prompting emergency diplomatic consultations and sending Japanese tourism stocks plummeting as Beijing warned its citizens to stay away from its neighbor.
Breaking with Precedent
The crisis began when Prime Minister Sanae Takaichi told Japanese lawmakers on November 7 that a Chinese military attack on Taiwan could constitute an existential threat to Japan, potentially justifying a military response. Her remarks broke with the careful ambiguity maintained by previous administrations, which deliberately avoided discussing intervention scenarios to prevent antagonizing Beijing.
Takaichi, a conservative politician with hawkish views on China and an ally of the late Prime Minister Shinzo Abe, made the comments just one week after what appeared to be a cordial first meeting with Chinese leader Xi Jinping on the sidelines of an APEC summit in South Korea. The timing stunned observers and suggested a calculated political move reflecting the views of Japan's conservative establishment.
China's Multifaceted Response
Beijing's reaction was immediate and aggressive. On November 8, China's Consul General in Osaka posted threatening language on social media, prompting Japan to summon China's ambassador to protest what it called an "extremely inappropriate" statement. The incident intensified when China summoned Japan's ambassador on Thursday—the first such summons in over two years—to lodge a formal protest.
By Friday, China had escalated further, warning that Japan would face a "crushing" military defeat if it intervened over Taiwan. Beijing also expressed concerns about Japan's security direction, particularly regarding potential ambiguity in Japan's three non-nuclear principles not to develop, possess, or host nuclear weapons. A Reuters investigation in August had indeed found growing willingness among Japanese politicians and the public to reconsider this long-standing taboo.
China then issued travel warnings advising its citizens to avoid Japan and recommending students reconsider enrolling at Japanese universities. On Sunday, Chinese coast guard ships conducted what Beijing termed a "rights enforcement patrol" through waters around the Senkaku Islands, territories controlled by Japan but claimed by China as the Diaoyu Islands. The islands have been a persistent flashpoint since Japan nationalized them in 2012.
Economic Fallout
The economic consequences became immediately apparent on Monday. Shares in companies dependent on Chinese tourism suffered significant losses: department store operator Isetan Mitsukoshi fell more than 10%, Japan Airlines dropped 4.4%, cosmetics manufacturer Shiseido declined 9%, and Fast Retailing, owner of the Uniqlo brand, lost more than 4%.
The stakes are substantial. China represents Japan's largest source of tourism, with Chinese visitors known for substantial spending on cosmetics, clothing, and consumer electronics. Takahide Kiuchi, executive economist at Nomura Research Institute, warned that a decline in Chinese visitors comparable to the 25% drop during the 2012 island dispute would have "a dampening effect exceeding half of Japan's annual growth."
Diplomatic Damage Control
Japan has mobilized diplomatic channels to contain the crisis. Masaaki Kanai, director general of the Foreign Ministry's Asia and Oceania bureau, will meet his Chinese counterpart Liu Jinsong in Beijing this week. Kanai is expected to clarify that Takaichi's comments do not signal a fundamental shift in Japan's security policy and to urge China to refrain from actions that further damage bilateral relations.
Japan's Chief Cabinet Secretary stated that China's travel warning "is incompatible with the broad direction of promoting a strategic, mutually beneficial relationship," adding that Japan has made a "firm request for the Chinese side to take appropriate steps."
Strategic Imperatives
Taiwan's strategic importance to Japan is undeniable. Located just 110 kilometers from Japan's westernmost islands and positioned near vital shipping lanes for oil and gas imports, Taiwan sits at the heart of Japan's security calculations. Japan also hosts the largest concentration of U.S. military forces outside American territory, making it central to any regional contingency.
Taiwan's President Lai Ching-te has described Takaichi as a "staunch friend" and called China's actions a "multifaceted attack" on Japan. He urged China to "exercise restraint and demonstrate the conduct befitting a major power, rather than becoming a troublemaker for regional peace and stability."
The crisis underscores the fundamental tension in Japan-China relations: while the two nations are indispensable trading partners, their relationship remains burdened by historical grievances, territorial disputes, and divergent security interests. How effectively both sides manage this latest confrontation will have implications far beyond bilateral relations, potentially affecting regional stability and the broader U.S.-China strategic competition.