Analysis

China-Japan: Dispute Over Islands Threatens Global Economy
Anti-Japan protesters are confronted by police as they demonstrate over the disputed Diaoyu Islands on September 16, 2012 in Shenzhen, China. Protests have led Honda, Toyota and Panasonic, all Japanese companies, to close their factories in China temporarily. (Photo by Lam Yik Fei/Getty Images)
September 21, 2012
| Economics, Energy
| Asia and the Pacific
Summary
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The rapidly escalating tensions between China and Japan over control of the Senkaku Islands will undoubtedly have economic ramifications for the two countries, particularly over the short term. And while the United States has so far remained neutral, it will find this position difficult to maintain as the dispute begins to impact the global economy.

The spark of this conflict was the purchase last week by Japan of the privately held Senkaku Islands (Diaoyu Islands in Chinese). This purchase sparked a flurry of protests, both official and unofficial, in China. China has quelled the most violent protests, but the government has officially encouraged a boycott of Japanese products. In addition to threatening sanctions, China is sending commercial as well as scientific patrol and monitoring vessels to the disputed islands. Specifically, it could become a thorny issue in Sino-U.S. relations since Beijing views Washington as siding with Tokyo. In this analysis, LIGNET examines the rising tensions between Asia’s two largest powers and implications for the United States.

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