Panasonic, Canon, Mazda and Uniqlo were among the Japanese household brands finding their China-based businesses hit by angry protests over a disputed chain of islands.
China believes the islands, called the Senkaku by Japan and Diaoyu by China, were invaded by the Japanese during the Second World War, and were returned to China when Japan was defeated. Last week, the Japanese government purchased three of the five islands, prompting a wave of protest in China. Beijing has sent six surveillance vessels to the area, and yesterday about 1,000 Chinese fishing boats set sail for the islands.
Against this backdrop, there have been sometimes violent protests in China's cities, with protesters attacking the Japanese embassy in Beijing. While there are fears that the tensions could escalate into a more serious conflict, the initial fallout looks likely to be felt on trade between Asia's two biggest economies.
China is Japan's largest trading partner, while Japan is China's third-largest. In the China Daily newspaper, Jin Baisong, the deputy head of a think-tank linked to the Chinese Ministry of Commerce, said China was in a position to deal a heavy blow to the Japanese economy without hurting itself too much by resorting to sanctions.
Diplomats have warned Japanese expatriates to stay indoors because anti-Japanese sentiment is expected to ratchet up today for the anniversary of the Mukden incident in 1931, when Japan seized Manchuria in north-east China. Honda, Mazda and Nissan have all suspended production for several days, while Fast Retailing Co, Asia's largest apparel company, said it had closed some of its Uniqlo stores. Panasonic has also been affected, with one of its plants in China sabotaged by local workers. Meanwhile, the 7-11 operator Seven & I Holdings said it would close 13 of its Ito Yokado supermarkets and 198 convenience stores in China. Canon will stop production at three of its four Chinese factories.
There were efforts to calm the tension yesterday, with text messages sent to mobile phones in many cities urging people to obey the law and not go around smashing things. A foreign ministry spokesman, Hong Lei, said the Beijing government would protect Japanese firms and citizens but added: "The gravely destructive consequences of Japan's illegal purchase of the Diaoyu islands are steadily emerging, and the responsibility for this should be born by Japan."