The author is a Reuters Breakingviews columnist. The opinions expressed are his own. Updates to add graphic.
By Hudson Lockett
HONG KONG, Nov 18 (Reuters Breakingviews) - Sanae Takaichi has broken the seal on Taiwan, and no amount of diplomatic legwork can change that. By labelling a potential attack by the People’s Liberation Army on the self-ruled island claimed by China “a situation threatening Japan’s survival”, the prime minister has reinforced Beijing’s concerns over a historical foe with ambitions to remilitarise. This ups the odds that Japanese corporates’ Chinese operations will get caught in the economic crossfire.
The phrase uttered in parliament on Wednesday is a legal description introduced in 2015 which, if invoked, allows the premier to deploy the country’s Self-Defense Forces. And any such attack by the PLA could well jeopardise the sea lanes around Taiwan used for fuel shipments by Japan, which is overwhelmingly reliant on energy imports. But previous leaders have eschewed public discussion of the scenario to avoid provoking Beijing, which bristles at the prevalence of U.S. military bases on Japanese soil.
After China on Friday advised its citizens to avoid travelling to Japan, Tokyo dispatched Masaaki Kanai, foreign ministry official in charge of Asia and Oceania affairs, to Beijing for a meeting with his counterpart Liu Jinsong for damage control, per Reuters. But any success in achieving a short-term cooldown belies a rise in baseline geopolitical temperature.
That’s because the incentives now encourage a hawkish approach from both sides. The ascent of Takaichi means Japan and China are now helmed by leaders who consider buildup of military capacity a top priority. For Japan’s leader that entails a big boost to defence spending and revision of her country’s pacifist constitution—a domestically controversial project that’s easier to justify if tensions with China keep ratcheting up. The regional ambitions of her counterpart Xi Jinping will be re-energised in turn.
That’s bad news for companies that have capitalised on Chinese tourism to Japan like $47 billion Trip.com 9961.HK, which has sold off amid reports of cancelled tickets to Tokyo. It could prove even worse for the likes of Toyota Motor 7203.T and cosmetics group Shiseido 4911.T, among the biggest names in Japanese industry tapping China’s vast consumer market for sales.
A previous diplomatic stand-off in 2017 over deployment of a U.S. missile shield in South Korea provides an ominous precedent. That saw Beijing ban tour groups to its neighbour and spurred anti-Korean sentiment which did lasting damage to sales of cars from Hyundai Motor 005380.KS and Kia 000270.KS and ultimately contributed to total withdrawal from the Chinese market by Lotte 004990.KS last year. Such outcomes aren’t inevitable, but the risk increases as the feedback loop of aggression between two of Asia’s largest economies worsens, as now looks more likely than not.
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CONTEXT NEWS
Masaaki Kanai, Japan’s foreign ministry official in charge of Asia and Oceania affairs, arrived in Beijing on November 17 for a meeting with his counterpart, Liu Jinsong, to emphasise that his country’s security policy has not changed and urge China to refrain from actions that could damage ties, Reuters reported. The meeting came after China on Friday advised its citizens to avoid travel to Japan.
The dispute erupted after Japan's Prime Minister Sanae Takaichi told lawmakers on November 12 that a Chinese attack on Taiwan threatening Japan's survival could trigger a military response.
Her comments broke with past Japanese administrations' avoidance of public discussion of such a scenario, so as not to provoke Beijing, which claims the self-ruled island as its own. Taiwan is located about 110 km (68 miles) from Japan's westernmost island of Yonaguni, near sea lanes on which Tokyo relies for energy shipments. Japan also hosts the largest concentration of U.S. military power outside the United States.
Lotte shares were hammered by China diplomatic row in 2017 https://www.reuters.com/graphics/BRV-BRV/jnvwkwzxmvw/chart.png
(Editing by Una Galani; Production by Aditya Srivastav)
((For previous columns by the author, Reuters customers can click on LOCKETT/ hudson.lockett@thomsonreuters.com))
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