A territorial dispute between China and Japan has flared-up again in recent months, bringing geopolitical risk to the forefront in 2014. But just how serious could strains between Asia's two biggest economies get?
"The situation is set up in a manner that a slight nudge in either direction could make something happen," said John Rutledge, chief investment strategist at Safanad in California.
Political analysts say that military conflict between Asia's heavyweights is unlikely since it's in neither party's interest. Furthermore, Japan is allied to the U.S., which China does not want to antagonize.
Still, they add that the situation in Asia remains a dangerous one: A belligerent China is looking to assert its position in the South China and East China Seas, alarming neighbors as well as the U.S., the world's remaining superpower.
"Bluntly put, Beijing's long-term strategic intentions inspire deep anxieties," think tank Carnegie Endowment for International Peace said in a report this month.
Analysts say the Japan-China relationship is one of the most important bilateral tie-ups in the world in terms of its impact on economic and regional stability. And with bilateral trade between the two Asian powers estimated at some $300 billion, any deterioration in relations is likely to have significant repercussions for Asia's economy.
For instance, Japanese shipments to China tumbled 14.1 percent in September 2012 from a year earlier, the biggest decline since January that year. That was the last time there was an escalation in Japan-China tensions, with anti-Japan protests across China and a boycott of Japanese brands taking place.
Source: NewsOnJapan
