China, Japan, and Taiwan: Rising Tensions Over Territorial Disputes, Military Expansion, and Trade Disruptions Affecting East Asia and Regional Tourism – Here’s What You Need to Know

Published on December 6, 2025

Tensions between China and Japan, two of Asia’s most powerful countries, have reached new heights as long-standing disputes continue to escalate. With both nations involved in fierce territorial conflicts and strategic military build-ups, the geopolitical landscape of East Asia is being significantly reshaped. The Taiwan Strait issue, with Taiwan’s sovereignty at the center, has been a major trigger for recent tensions, pushing Japan to reconsider its military posture. This shift is deeply intertwined with Japan’s longstanding trade relations with China, which are now threatened by political and military actions. With diplomatic relations at a crossroads, the future of these two economic giants remains uncertain. As China flexes its military might, Japan faces difficult decisions that could redefine the region’s balance of power for years to come.

Historical Rivalry and Tensions

The relationship between China and Japan is marked by centuries of conflict and cultural exchange. The two countries, once dominant powers in Northeast Asia, have influenced each other’s societies and economies, yet their history is fraught with warfare and territorial disputes. The brutal Japanese invasion of China during the Second Sino-Japanese War (1937-1945), including the infamous Nanjing Massacre, continues to leave scars in both nations’ collective memory. These historical events, along with ongoing territorial claims, serve as a constant source of tension.

In recent years, China and Japan have both made territorial claims over a small group of islands in the East China Sea known as Senkaku (Japan) or Diaoyu (China). This conflict has become one of the most persistent sources of discord in their relationship.

Territorial Disputes in the East China Sea

One of the key flashpoints between China and Japan is the Senkaku Islands, located in the East China Sea. These uninhabited islands are rich in potential natural resources and strategically significant, making them a key territorial issue. Japan has maintained control over these islands since the 19th century, but China claims sovereignty, referring to them as the Diaoyu Islands. In 2012, a controversial decision by Japan to nationalize some of these islands sparked a surge in Chinese protests and aggressive patrols by Chinese vessels in the area.

Since then, the frequency of Chinese coast guard vessels entering Japan’s territorial waters has only increased. In 2024, the number of Chinese ships in the region reached a record high. These movements have led to heightened concerns over the security of the region, drawing in military forces from both nations.

Growing Military Build-Up

The recent rise in military tensions is also attributed to China’s expanding military capabilities and its increasing influence in the region. Japan has long viewed China’s military growth with concern, especially as China continues to modernize its armed forces and expand its naval presence. As a result, Japan has accelerated its military buildup, increasing its defense spending to counter China’s growing strength.

In 2025, Japan’s defense strategy focused heavily on China as its “greatest strategic challenge”, marking a significant shift in Japan’s military outlook. With China dramatically increasing its defense budget, Japan is not only enhancing its military forces but also accelerating the development of missile defense systems and military bases on its southern islands, particularly in response to the Taiwan issue.

Taiwan: The Crux of the Standoff

Taiwan is a major factor contributing to the growing tensions between China and Japan. China considers Taiwan to be a part of its territory and has vowed to reunify with the island — by force if necessary. While Japan formally recognized China’s stance on Taiwan in a 1972 diplomatic communiqué, the reality on the ground is much more complicated.

Japan’s proximity to Taiwan (just over 100 kilometers away from Yonaguni, Japan’s southernmost island) means that any conflict in the Taiwan Strait could have immediate consequences for Japan. The potential deployment of Japan’s Self-Defense Forces (SDF) in the event of an escalating Taiwan crisis has raised alarms in Beijing, which views Japan’s involvement as a direct threat to its territorial claims.

Recently, Japan’s Prime Minister Sanae Takaichi publicly stated that a Taiwan conflict could pose a “survival-threatening situation” for Japan, drawing sharp reactions from China, which accused Takaichi of meddling in its internal affairs. This has added another layer of complexity to the already volatile relationship between the two nations.

Economic Ties and Trade Conflicts

Despite their political differences, China and Japan are crucial economic partners, with China being Japan’s top trading partner. However, political tensions are increasingly affecting this economic relationship. Japanese firms, which once thrived in the Chinese market, are now facing growing challenges. A series of trade restrictions and China’s counterespionage laws have made Japanese companies more cautious about investing in China.

One of the most significant economic concerns is China’s dominance of the rare-earth metals market, essential for industries such as electronics and automobiles. In the past, China has used its control over this supply chain as leverage during times of tension with Japan. Furthermore, the growing influence of Chinese consumer brands, such as Shein, in Japan’s market is shifting the balance of trade.

The Impact on Tourism

The economic repercussions of this ongoing standoff are also being felt in the tourism industry. Chinese tourism plays a significant role in Japan’s economy, with Chinese visitors accounting for nearly one-quarter of all inbound travelers to Japan. In 2025, China has imposed travel restrictions, urging its citizens to avoid traveling to Japan amid escalating tensions. The reduction in Chinese tourists is expected to have a significant impact on Japan’s tourism industry, particularly during the lucrative holiday seasons.

What Travelers Should Know

For travelers planning to visit Japan or China, understanding the current geopolitical landscape is essential. While the situation remains dynamic, here are a few important considerations:

• Travel Restrictions: Chinese nationals may face delays or cancellations of flights to Japan due to government advisories.
• Safety Concerns: Travelers should stay informed about the latest military developments and territorial disputes in the East China Sea.
• Business Operations: If you’re a business traveler, be aware that trade tensions could affect economic transactions between the two countries.

For those looking to visit China or Japan, understanding the potential economic impacts and staying updated on the political climate will be crucial for ensuring smooth travels and operations in the region.