Territory Dispute Between China and Japan Over Islands Disrupts Economy

By: Jeremy Bober-Inoue

Relations between Japan and China, two of Asia’s biggest economies, has never been in good spirits, their exchange has been referred to as “hot in trade and cold in politics”.  However two countries have managed to stay complacent as they are one of each other’s largest trading partners.  This changed on September 11 when the Japanese Cabinet approved Tokyo Governor, Shintaro Ishihara’s, request to use public funds to buy the islands from a private owner which has resurrected a decades old feud on the Islands true ownership.  China contests that this “constitutes a severe violation of China’s sovereignty”.  Since then Japanese personnel have landed on the islands and boats have been patroling recently.

Disdain towards Japan hasn’t been this heated since 2005 when Japanese textbooks downplayed the brutality of their actions during the Second World War.  Protests have been held daily since the occurrence forcing some Japanese companies to reduce its presence.  Japanese made cars have been flipped by mobs of people as well as vandalizing the embassy in Beijing.  Correspondingly the interest in these vehicles has declined.  Nissan Motor Co. has adjusted its manufacturing and has reported a 8.9% reduction in output.  Additionally Toyota Motor Corp. and Honda Motor Co. have reduced output 18% and 10% respectively.

Furthermore travel between the two countries has slowed down.  Both All Nippon Airways and Japan Airlines Co. have seen cancellations in the tens of thousands from China and Japan.  On China’s side, Spring Airlines, has canceled at least 10 flights which were chartered for tourist groups because of the conflict.  Even officials on both sides have broken off ceremonial visits in honor of forty years of diplomatic relations.  Other events declined are an international disaster relief conference in Tokyo and an appearance at the Annual National Day parade in Tokohama.

Earlier this month the de-stability forced several companies to shut down its operations in China including Sony Corp, Canon Inc, and Hitachi Ltd.

Tension spilled over at a United Nations gathering of world leaders in New York on September 25th when foreign ministers held talk that did not seem to ease the problem created back home.  The feud which compiled for the above reasons is imparing a $340 billion trade relationship.

Another reason beside national pride is the immense potential of fishing and energy rights.