By Hiroshi Hiyama with Sam Davies in Beijing
Japanese tourism and retail shares dived on Monday after China warned its citizens to avoid the tourist hotspot in a spat over Prime Minister Sanae Takaichi’s comments on Taiwan.
A senior Japanese official meanwhile arrived in China seeking to defuse the row sparked by Takaichi’s suggestion that Tokyo could intervene militarily in any attack on the self-ruled island.
Asia’s two top economies are closely entwined, with China the biggest source of tourists going to Japan — almost 7.5 million in the first nine months of 2025.
Drawn by a weak yen making shopping cheaper, they collectively splurged more than a billion dollars a month in the third quarter, accounting for almost 30 percent of all tourist spending.
Japan was also the fourth-most popular destination for Chinese tourists last year, helping the land of Mount Fuji, sushi and geishas set new records for foreign arrivals.
But in fears that this may now stop, investors wiped nine percent off Japanese cosmetics firm Shiseido’s market value on Monday.
Department store group Mitsukoshi fell 11.3 percent and Pan Pacific, behind discount retail chain and tourist magnet Don Quijote, slid 5.3 percent.
Japan Airlines, whose shares nosedived 3.4 percent, has not seen any major cancellations on flights to and from China, a spokesperson told AFP.
Before taking power last month, Takaichi was a vocal critic of China and its military build-up in the Asia-Pacific.
If a Taiwan emergency entails “battleships and the use of force, then that could constitute a situation threatening the survival (of Japan)”, Takaichi, 64, told parliament on November 7.
Under Japan’s self-imposed rules, an existential threat is one of the few cases where it can act militarily. Taiwan sits around 100 kilometres (60 miles) from the nearest Japanese island.
‘Troublemaker’
Japan said Monday it scrambled aircraft after detecting a suspected Chinese drone near its southern island of Yonaguni, which is close to Taiwan, on Saturday.
Beijing insists Taiwan, which Japan occupied for decades until 1945, is part of its territory, and the comments have sparked a furore.
This has included a Chinese diplomat stationed in Japan threatening to “cut off that dirty neck”, apparently referring to Takaichi, and China and Japan have summoned each other’s ambassadors.
Beijing also advised its citizens to avoid travelling to the country and warned the roughly 100,000 Chinese students in Japan that there were risks to their safety.
Japan’s Chief Cabinet Secretary Minoru Kihara told reporters on Monday that the announcements were “incompatible with the broader direction agreed upon by the leaders of the two nations”.
On Sunday, Chinese coast guard vessels spent several hours in Japan’s territorial waters around the disputed Senkaku Islands, known as the Diaoyu in China and a frequent flashpoint, Kihara said.
In Beijing, tech worker Daniel Feng called the Chinese government’s responses “very restrained” given Takaichi’s “extremely unreasonable” remarks.
“If she spouts words, that’s not a problem… but if they take real action, our country’s military will definitely defeat them,” the 40-year-old told AFP.
Taiwanese President Lai Ching-te called on Beijing on Monday to “show restraint, act like a major power, and not become the troublemaker” in the Asia-Pacific region, where peace and stability have been “severely impacted”.
“China should return to the path of a rules-based international order, which would help maintain peace, stability and prosperity in the region,” Lai told reporters.
Economic hit
Beijing meanwhile said than Chinese premier Li Qiang has no plans to meet with Takaichi in a G20 summit in South Africa later this week which they are both set to attend.
A Japanese government official told AFP that Masaaki Kanai, the top foreign ministry official for Asia-Pacific affairs, arrived in China on Monday.
“We are trying not to escalate the situation,” the official told AFP.
Kanai is expected to hold talks with his Chinese counterpart Liu Jinsong on Tuesday, according to media reports.
The diplomatic spat could spell further bad news for Japan’s economy, which shrank by 0.4 percent in the third quarter, official data showed on Monday.
Marcel Thieliant at Capital Economics warned that the tensions risked escalating “into a full-blown trade spat” similar to a previous episode in the early 2010s.
This could include China restricting exports of rare earths or imposing restrictions on Japanese exports.
“Carmakers look particularly vulnerable as they are already under enormous pressure from the ascent of Chinese electric vehicle manufacturers,” Thieliant added.
