Japan-China spat over Taiwan comments sinks tourism stocks
Asia's two top economies are closely entwined, with China the biggest source of tourists -- almost 7.5 million visitors in the first nine months of 2025 -- coming to Japan.
Japan's Prime Minister Sanae Takaichi (C) attends a session of the House of Councillors Budget Committee at the National Diet in Tokyo on November 14, 2025. (AFP)
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TOKYO - 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, reports said, 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 -- almost 7.5 million visitors in the first nine months of 2025 -- coming to Japan.
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.
Battleships
Before taking power last month, Takaichi was a vocal critic of China and its military build-up in the Asia-Pacific.
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.
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 prime minister's 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.
Economic hit
Japanese media reports said the top official in the foreign ministry for Asia-Pacific affairs arrived in China on Monday.
Masaaki Kanai was due to hold talks with his Chinese counterpart Liu Jinsong, the reports said.
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.