SHANGHAI, China - On Sunday, Japan headed to the polls to return the Liberal Democratic Party to power and select former Prime Minister Abe Shinzo as the man to steer the country out of its nearly quarter-century long financial crisis.
But Abe might face just as serious a challenge dealing with the country's security crisis with China. On Thursday, just three days before the election, the Japanese government responded to a Chinese propeller plane flying over what Japan considers its own airspace by sending eight F-15 fighter planes in response. Ominously, it's the first time a Chinese aircraft has intruded into Japanese airspace. The incident is just the latest in the two countries' ongoing showdown over who owns the Senkakus (the islands over which the Chinese plane was flying, known in China as the Diaoyu) that threatens to destroy their bilateral relationship and possibly even send them to war. Prime Minister-to be Abe shows no sign of backing down over the issue, and reiterated the day after the election that the Senkakus are indisputably Japanese territory.
In Shanghai, China's economic center, discussion about Japan focuses on just how much Tokyo might be willing to risk trade between the two countries over the uninhabited islands. When he takes over next week, Abe needs to understand that China's new leader Xi Jinping has apparently unanimous backing domestically, and can patiently continue to chip away at Japan's administrative control over the Senkakus without fear of having to settle the issue anytime soon. That means Tokyo will have to counter with an equally patient, yet credible strategy.
After a seemingly smooth power transfer in November, Xi leads China's Communist Party and is slated to take over government positions next year. Now the ruler of one of the world's most powerful countries, Xi has unfortunately given little indication of his views on international affairs, other than repeating bromides about China's peaceful rise and asserting that it is "absolutely not a threat" to its neighbors. In a recent meeting with foreign experts, he was quoted as saying that China "will not seek hegemony or expansionism." Yet on specific issues, such as territorial disputes like the Senkakus, Xi has been quiet.
Ties between the two Asian giants remain central to the region's economic prosperity and political stability. In 2011, China and Japan did nearly $340 billion in bilateral trade, largely in electronics, machinery, and foodstuffs, as well as component parts for assembly in China. Millions of Chinese are employed by Japanese firms on the mainland. In June 2012, the two countries introduced a direct yen-yuan exchange mechanism, allowing them to bypass the U.S. dollar and reduce costs of financial transactions.
Yet at the same time, each is also attempting to shore up its own economic position, Japan by flirting with the idea of joining negotiations over the Trans-Pacific Partnership (TPP) free trade area, and China by exploring ways for the yuan to play a larger global financial role. Politically, each continues to jockey for more international prestige and influence, whether through multilateral organizations or direct ties with other countries.
Politics, however, has put economic ties between the world's second and third largest economies at risk. Major exporters, such as Toyota, have seen sales decline by up to half during the autumn after weeks of demonstrations in China over the Senkakus. Japan's decision this summer to buy several of the privately owned islands may have been a move to forestall Tokyo's then-governor Ishihara Shintaro from doing the same thing, but it ruptured relations with Beijing, unleashed a firestorm of anti-Japanese protests throughout China, and set off an ongoing maritime face-off in the waters around the islands. Chinese generals and commentators have been reported urging the country to prepare for combat, and Western observers, including U.S. Defense Secretary Leon Panetta, have raised concerns that conflict could break out between the two historical rivals.
Like Abe, Xi is unlikely to radically alter Beijing's stance on the islands, which is that they have always been China's territory "historically and legally," according to an October press briefing by Vice Foreign Minister Zhang Zhijun. Yet he will have to balance a firm diplomatic line with far harsher semi-official stances that serve to inflame Chinese nationalism. For example, Lt. Gen. Ren Haiquan, at meeting of senior military officials from 16 countries in Australia in November, stated that the dispute could cause war with Japan, which he reminded his listeners was once a "fascist" nation that attacked Australia. The hawkish Maj. Gen. Luo Yuan even recommended that rather than negotiating with Japanese, China should send hundreds of maritime vessels to the disputed area to conduct maritime guerrilla warfare. So far, Xi has not specifically repudiated such statements, but neither has he indicated that he intends to reduce the pressure on Japan. Chinese vessels continue regularly to enter the waters around the Senkakus, triggering Japanese Coast Guard responses.