Japan's Takaichi has few good options to end China's backlash

Japanese Prime Minister Sanae Takaichi is facing her first major diplomatic test less than a month into office, after angering China with remarks about Tokyo’s position on the red line issue of Taiwan.

Takaichi this month became the first sitting Japanese leader in decades to publicly link a Taiwan Strait crisis with the possible deployment of Japanese troops, prompting Beijing to unleash a flurry of economic reprisals and threats of more retribution.

China’s Foreign Ministry spokeswoman Mao Ning at a briefing on Monday re-upped a demand for Takaichi to retract her comments about the self-ruled island Beijing considers its territory. Making clear the terms for deescalation, she called on Japan to: “Stop crossing the line and playing with fire, retract the wrongful remarks and deeds and honor its commitments to China with real action.”

So far, Takaichi has refused to recant. Elected by her party as a nationalist who’d show strong leadership, Takaichi would face significant political blowback if she bowed to Beijing. That’s creating a standoff between Japan and its largest trading partner with little off-ramp in sight, as Chinese state media implies Beijing could impose sanctions and cut diplomatic, economic and military communication channels if things spiral.

Kunihiko Miyake, a former Japanese diplomat based in China, said he didn’t expect Takaichi to back down and didn’t think she had to. “If China is pressuring us to weaken Takaichi it’ll probably have the opposite effect,” he said, noting her high approval ratings, which have reached over 80%. “They are fueling her engine.”

Takaichi may have made a strategic error, he added, but history has shown that when Japan and China spar over sensitive issues an agreement typically comes after a months-long diplomatic freeze.

“Although China’s reaction has been very strong so far, it’s very calculated,” said Rumi Aoyama, a professor of Japan-China relations at Waseda University in Tokyo. “China is aiming to deal a blow to Japan’s economy, but I don’t think there’s an intention to cut ties.”

The danger for Takaichi is if China turns the screw on Japan’s economy and businesses more than expected. Beijing’s supply of critical minerals that Tokyo’s auto industry relies upon is among its clearer chokeholds. Further weaponization of rare earths might complicate matters by attracting the attention of U.S. President Donald Trump, who claimed his trade truce with China had “settled” the issue over rare earths “for the world.”

That pledge came on the same trip the Republican leader told Takaichi: “Anything you want, any favors you need, anything I can do to help Japan, we will be there.”

While China’s ties with Japan have been rocky for decades over disputes spanning Tokyo’s invasion of its neighbor in the 1930s to competing territorial claims, in recent months relations had stabilized. The forthright views of Takaichi, who visited Taiwan’s President Lai Ching-te in April months before she took office, could now undermine that progress.

As crisis mode kicked in, Tokyo on Monday dispatched top diplomat Masaaki Kanai to Beijing to try to calm ties. China’s Foreign Ministry said it had no information on that visit, and told reporters Premier Li Qiang had no plans to meet with the Japanese leader this weekend at the G-20 leaders’ summit in South Africa.

Without a resolution, Beijing will likely ramp up pressure. China in recent days has urged its citizens — who make up about a quarter of all visitors to Japan — to avoid its Asian neighbor citing safety risks. Tour operators so far haven’t seen any significant flight or hotel cancellations, Bloomberg reported, citing people familiar with the matter.

Without a resolution, Beijing will likely continue to ramp up pressure. China in recent days has urged its citizens — who make up about a quarter of all visitors to Japan — to avoid its Asian neighbor citing safety risks. Tour operators so far haven’t seen any significant flight or hotel cancellations, Bloomberg reported, citing people familiar with the matter.

For Beijing, Takaichi’s remarks were not a blunder as some have suggested, but in keeping with her right-wing stance, two researchers at a top government think tank in Beijing wrote on Sunday in state media. They called her “a spokesperson for Japan’s new militarism,” citing Takaichi’s frequent visits before taking office to the Yasukuni shrine honoring Japan’s war dead, and a plan to boost defense spending.

All previous Japanese leaders have deflected on the question of what would be a “survival threatening situation” to Japan, maintaining strategic ambiguity and saying they would make a decision based on the circumstances at the time. Takaichi’s response marked a departure from that stance.

“Takaichi has contradicted long years of wise and careful views by giving a direct answer,” said Kazuhiko Togo, visiting professor at the University of Shizuoka in Japan. “Former Prime Minister Shinzo Abe, who was Takaichi’s mentor, would not have done this. Someone needs to tell her that.”

Henry Wang Huiyao, founder of the Center for China and Globalization research group in Beijing, said the Japanese government should take more action to walk-back her remarks. He added that when former U.S. President Joe Biden strayed from strategic ambiguity and said his country would defend Taiwan, U.S. officials would quickly clarify there was no change in position.

The last time China’s ties with its neighbor spiraled to this extent was in 2012, after Tokyo decided to nationalize contested islands known as the Senkaku in Japan and the Diaoyu in China — an uninhabited but possibly resource-rich area in the East China Sea. Back then, bellicose rhetoric in China’s state media helped fuel anti-Japanese protests in more than a dozen cities.

This time around, Xi Jinping is likely to be more cautious about stoking nationalism. A spate of violence against Japanese citizens in China, including the stabbing to death of a schoolboy last year, has shown the dangers to provoking such anger, meanwhile Beijing is generally wary of public demonstrations of any kind, especially amid growing malaise over the slowing economy.

The Japanese embassy in Beijing has urged citizens to take precautions amid rising tensions between Japan and China, according to a notice issued on its website on Monday evening.

While the 2012 stand off produced a months-long boycott of Japanese products, the impact was contained. Japan took a roughly 10% hit to exports — a dent Takaichi might gamble she can ride out, given wider global volatility over trade flows.

Japan’s carmakers — among the companies impacted last time around — have reduced their reliance on the Chinese market from a decade ago, but the importance of China’s supplies of rare earths and semiconductors has risen, according to Tatsuo Yoshida, senior analyst for autos at Bloomberg Intelligence.

“If a rare-earths embargo is exercised, it will disrupt auto production, particularly rare-earth rich products like electrified vehicles,” Yoshida said. “But I think there will be a time-lag as suppliers, automakers and trading companies must have built up inventories as a contingency plan.”

Nevertheless, the longer the dispute continues the more it is likely to weigh on Japan’s economy, running counter to Takaichi’s goal of producing stronger growth.

“Still, I don’t expect this to escalate to an extent we saw in 2012,” said Atsushi Takeda, chief economist at Itochu Research Institute. “I don’t think it’s in China’s interests to get into a deep spat with Japan while it is also confronting the U.S.”

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—With assistance from Sakura Murakami, Lucille Liu and Toru Fujioka.