The recent spat between Japan and China which erupted after the nationalization of the Senkaku islands shows no signs of abating. In September 2012, the Noda Administration in Japan purchased three of the five Senkaku islands-Uotsurijima, Kita-kojima and Minami-kojima-and then nationalised them. Beijing opposed the nationalisation and claimed its ‘indisputable sovereignty' over the Senkakus (Diaoyu in Chinese). It also termed Japan's unilateral move in nationalising the islands as illegal and invalid. Tokyo, however, asserted that the islands have been historically part of Japanese territory. It also alleged that China started claiming sovereignty over the Senkakus only after a 1968 UN Commission reported possible undersea deposits nearby. In the meantime, Taiwan, another claimant to the islands, took an equally strong stance against Japan's nationalisation and alleged that it was an infringement upon its own sovereignty over these islands.
Because nationalisation appeared as intended to demonstrate Japan's uncompromising stance on sovereignty over the Senkakus, it evoked large-scale anti-Japan protests within China. Chinese protestors attacked the Japanese embassy and vandalised Japanese-affiliated business establishments. The tension between the two countries seemed to heighten further as during this period, the Japanese Coast Guard vessels and Chinese surveillance ships continued to square off against each other in the waters near the Senkakus. The Chinese government's recent support for Taiwanese fishing boats and patrol vessels to enter the waters off the Senkakus has worried many Japanese. The emphatic statement made by Jia Qinglin, one of the key figures of China's communist party, about the urgency of forming a China-Taiwan united font vis-à-vis Japan has made Tokyo wonder if both China and Taiwan are actually working in tandem.
In the meantime, Beijing's persistent attempt to internationalise the Senkaku issue has evoked a strong response from Tokyo. While during the China-EU Summit in Brussels, Chinese Premier Wen Jiabao was emphatic about the necessity of taking ‘strong measures' on the issue, Vice President Xi Jinping accused Japan of staging ‘the farce' of purchasing the islands. Then, at the recent UN General Assembly meeting, Chinese Foreign Minister Yang Jiechi alleged that Japan "stole" the islands from China after the 1895 Sino-Japanese War. China even abstained from sending its representative to the plenary session of the annual meetings of the IMF and the World Bank Group scheduled in Tokyo from October 14. In a nautical chart submitted to the United Nations by the Chinese government recently, Beijing even identified the areas around the islands as its own ‘territorial waters'.
In the face of increasing demand from the Japanese public to assert Japan's own stance on the issue, the Noda Administration also has taken certain measures to appeal to the international community. The Japanese Foreign Ministry has, in its home page, developed a new banner labelled as "Japan-China Relations: Current Situation on the Senkaku Islands". For the next fiscal year, it has already requested 600 million yen for public relations, investigation and research over Japan's territorial integrity, including the Senkakus. Tokyo is also considering lobbying for international support by dispatching the Foreign Ministry's top key parliamentary ministers, including Foreign Minister Koichiro Gemba, to relevant countries to explain Japan's stance on the Senkakus.
The spat between Japan and China has trampled on the cooperative relations that they have nurtured over many years. This has, in particular, adversely affected their strong economic ties. The delay in the resumption of operations in several Japanese factories in China and the Chinese government's lack of initiative to compensate them for the damage caused during the demonstrations have made Japanese business houses wary about their investments in China. There is no doubt that Japan's investment in China, which reached a total of US $6.3 billion in 2011, might drop significantly in the coming months if the current tension drags on. From January to September 2012, China's trade with Japan reportedly fell 1.8 per cent compared with a year earlier. If the spat pushes some of the Japanese-affiliated companies in China to close down their factories and shift them to other Asian countries like Vietnam and Thailand, the employment of several million Chinese workers in those companies would pose a major challenge to the Chinese government. As China is Japan's biggest trading partner, economic turmoil in China is bound to have a negative impact on the Japanese economy. China has also been the biggest export market for Japanese businesses. Thus, in September 2012, as China's imports from Japan plunged 9.6 per cent, it had a strong impact on the Japanese economy.
To avoid further deterioration in the bilateral relationship, both Japan and China need to now abandon their hard-line stance and stop escalating nationalistic sentiments among their people. However, a resolution of the issue through peaceful means has become complicated due to strong political pressure within the two countries. Due to the upcoming general election in Japan and the leadership transition in China, both the DPJ in Japan and the CCP in China are apprehensive about hurting popular sentiments by adopting a compromising stance on the Senkaku issue. The CCP leadership is particularly concerned about taking any step during the ongoing 18th party congress (November 8-14), since it might trigger a nation-wide revolt against its rule. As far as Japan is concerned, any relaxation in the ruling DPJ-led government's stance vis-à-vis China might prove disastrous for the party's prospect in the upcoming general election expected to be held in 2013.
Under these circumstances, China and Japan have not been able to hold any meaningful dialogue to resolve the current impasse. Since any further delay in resolving the issue might aggravate bilateral tensions further, the two governments need to focus on softening their attitudes towards each other, promote people-to-people contact, encourage cultural activities and revive and strengthen their economic ties. At the same time, the United States along with other regional powers in East Asia need to take an initiative to create a conducive environment for China and Japan to hold a meaningful dialogue to heal their fraught relationship.