OVERINVESTED IN INSTABILITY:

China-Japan flames scald business (J Sean Curtin, 4/19/05, Asia Times)

The angry wave of anti-Japanese protests sweeping China for the past three weeks has generated a deep sense of unease in the business community as it threatens bilateral economic ties. Many fear that the current tensions, sparked initially by the approval of eight revisionist Japanese history textbooks, could significantly disrupt booming trade and investment flows.

Tokyo stocks plummeted across the board on Monday, with the key Nikkei index recording its biggest one-day loss in 11 months and ending at a four-month low. About 81 stocks fell for every one that gained on the Tokyo Stock Exchange's first section, its broadest decline since September 12, 2001, the day after the terror strikes in the United States. Monday's drop wiped US$115 billion off the value of stocks included in the Topix, reported Bloomberg.

Since the demonstrations begun, Japanese nationals working in China have begun to feel increasingly uneasy, and some are already planning to leave. Business confidence has taken a severe knock, especially after this weekend's violent anti-Japanese disturbances in Shanghai, a city where more than 40,000 Japanese expatriates live. Chinese threats to boycott Japanese goods as well as an escalating dispute about exploration rights in the East China Sea are edging a tense situation toward breaking point.

Until now, healthy bilateral trade volumes have been largely unaffected by poor Sino-Japanese political dialogue. However, there are very real indications that unless political leaders moderate their tough nationalist rhetoric, mutually beneficial economic bonds could start to deteriorate.

The Chinese collapse will also take pressure off oil prices.

Posted by Orrin Judd at April 18, 2005 8:11 AM