Senkaku conflict: what is the cost for Japan

7 years ago by in China, Featured

SenkakuJapan could face a prolonged recession due to the territorial conflict the country has with China over the Senkaku islands.

Japan’s economy still has to recover after Chinese consumers started a boycott of Japanese products four months ago over the conflict related to the islands in the East China Sea. According to the Chinese press, Japan’s auto market is only now starting to get back on track again, while Chinese factories began to work more with South Korean component suppliers, and the United States has displaced China as Japan’s largest export market.

“The spats have become increasingly costly as Japan’s dependence on China as an export market has risen,” said Tony Nash, a Singapore-based managing director at IHS. “Nationalism around the issue has resulted in lower demand for Japanese products in China and even Chinese firms sourcing products from Korean suppliers.”

The trade between Japan and China has developed three times since 2000 to over $300 billion, so the financial cost of maintaining the territorial conflict keeps rising, South China Morning Post comments. Japan’s industrial output fell 1.7 per cent in November to the lowest level since the earthquake in 2011.

The tension between the two countries over the Senkaku/Diaoyu islands made angry Chinese boycott Japanese products and smash Japanese shops in China.

“This has really changed things, unquestionably; it is not a blip,” said Professor June Teufel Dreyer, a specialist in Chinese politics at the University of Miami in Florida. “China will continue to push its claims to sovereignty until Beijing gets what it wants.”

The islands offer rich fishing grounds, potential oil reserves and a strategic military outpost in the sea between China, Japan and Taiwan.