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Given the importance of China to the sputtering Japanese economy—China is Japan's largest trading partner and the source of much of the latter's export growth in recent years—one might wonder why Tokyo chose to announce its intentions to drill in disputed waters. (China has already begun a $1 billion drilling project in a nearby East China Sea natural gas field, which Japan says infringes upon its turf.) But the real debate, of course, is not over borders or textbooks or a failure to atone for old sins. The issue is which country, Japan or China, will be the dominant Asian power of the 21st century. The Japanese government has witnessed with considerable unease the dramatic economic, political and military ascent of China—and it is not about to quietly concede leadership in the region to its giant rival. Indeed, Koizumi's major legacy will likely be building Japan's influence across Asia and the rest of the world to a level commensurate with its economic might. Naturally, that campaign is generating intense friction with Beijing. "The dispute reflects the anxiety that both sides feel over China's role as a rising power in the region," says Philip Yang, professor of political science at National Taiwan University in Taipei. As this plays out, "we will see a lot more cool issues become hot."
Recent tensions could signal the beginning of a protracted standoff. Japan's parliament last week began considering a 710-page report that stresses the need for the country to amend its pacifist constitution so it can beef up its military. At the same time, Japan has demonstrated a growing willingness to confront China on a host of issues. When a Chinese submarine ventured into Japanese waters in 2003, Japan's Maritime Self-Defense Force stalked it for days and Tokyo won a (halfhearted) apology from Beijing. In a recent defense report, Japan for the first time named China as a potential threat. Then, in a joint declaration with the U.S. last month, Japan named peace in the Taiwan Strait as a "strategic interest," a move Beijing considered meddling as it seeks to force Taiwan to reunify with the mainland. Some of Tokyo's actions that might seem hamfisted—the timing of announcements, the decisions on when to escalate—are in fact highly deliberate, argues a Western diplomat in Tokyo. "The Japanese government is not looking at these issues in terms of next week or even next month," he explains. "They are looking 30 years ahead. They believe that if they back down on many of them now, their leverage and initiative will be lost forever."
Koizumi's tougher stand is playing well at home. While Japanese watched with disbelief as TV cameras captured rioting Chinese denouncing Japan, a public poll by Jiji Press last week showed that, for the first time in three months, the Koizumi Cabinet's approval rating had overtaken its disapproval figures. But stoking nationalist sentiments comes at a cost: deteriorating political relations threaten to drive a wedge between two nations that have never been closer, economically and culturally. Chinese youths listen to Japanese pop while their increasingly well-off parents covet Japanese cars and electronics. Now, finding common ground may prove harder, as Chinese use their Japanese cell phones to send text messages calling for a boycott of Japanese products. One message that went out last week announced: "Every 100 yen of lost sales means 10 fewer bullets for the Japanese military, or eight fewer pages of anti-Chinese material in Japanese textbooks."
With an estimated 16,000 Japanese companies trading with China, the specter of a widespread boycott on the mainland is a worry for Japan's business leaders. In fact, the immediate economic impact would likely be limited because the bulk of Japanese exports to China are industrial products such as heavy machinery, steel and chemicals, not camcorders and cosmetics. Still, Jusco, a Japanese department-store chain with nine outlets on the mainland, was forced to briefly close two stores in Shenzhen and Guangzhou during early April's protests as a precaution. "We suffered a slight monetary loss," says Kenichi Suenami, a spokesman for AEON, Jusco's Chiba-based parent. "But it was nothing that surprising." Even if anti-Japanese sentiments intensified, Suenami says he doesn't expect losses to amount to more than "a few percent" because most of their goods are Chinese.
But worsening relations with Beijing can do economic damage nonetheless, in the form of reduced access to the China market and declining mainland investment. Already, Japanese organizers of the Japan Trade Fair in Shanghai, which drew 150,000 people last year, have postponed their planned May 20-23 confab until the fall. "If the bad feelings between the two countries linger," frets one top executive at a Japanese automaker, "that could shape consumer decisions later, particularly for young people."
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