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Shares of Japanese tourism and retail companies plummeted on Monday after China advised its citizens to avoid travel to Japan.
This diplomatic dispute was ignited by comments from Japanese Prime Minister Sanae Takaichi, who suggested that Tokyo could potentially intervene militarily if the self-ruled island of Taiwan were attacked.
The financial repercussions were immediate and severe: cosmetics giant Shiseido lost nine per cent of its market value, department store group Mitsukoshi fell 11.3 per cent, and Japan Airlines dropped 3.4 per cent.
This is significant because Chinese tourists are the largest source of visitors to Japan, collectively spending over a billion dollars monthly.
To de-escalate the situation, a senior Japanese foreign ministry official was reportedly dispatched to China.
However, tensions remain high, marked by both nations summoning each other’s ambassadors and Japan scrambling aircraft after detecting a suspected Chinese drone near the island closest to Taiwan.
Analysts are now warning that the spat risks escalating beyond travel warnings into a full-blown trade conflict, potentially hitting major sectors like Japanese car manufacturing.
