Japan Counters China With Compensation Demand for Coast-Guard Ship Damages

Japan said China should pay for repairs to two Coast Guard vessels damaged in a collision with a fishing boat, rejecting Chinese demands for compensation over an incident that has soured ties and shows no sign of abating.

“We will demand that the ships be returned to their original condition,” Chief Cabinet Secretary Yoshito Sengoku said in Tokyo. “The ball’s in China’s court” to improve relations that have sunk to the lowest in five years, he said.

The stand-off between Asia’s two biggest economies reflects competing claims of sovereignty over uninhabited islets in an area of the East China Sea that may contain oil and natural gas. China and Japan have yet to implement an agreement signed in 2008 to jointly develop gas fields near the islands, known as Diaoyu in Chinese and Senkaku in Japanese.

Sengoku said this afternoon that two Chinese patrol boats had been spotted near the disputed waters and that Japan had deployed six Coast Guard vessels to monitor their movements. He earlier reiterated the government’s rejection of Chinese demands for reparations and an apology for the seizure of the trawler. Japan released the boat’s captain on Sept. 24, triggering criticism it bowed to Chinese pressure.

‘Strategic Relationship’

“China’s ties with Japan are very important and are part of a strategic relationship that is mutually beneficial,” Sengoku told reporters this morning. “I believe that China has many things to think about in the wake of the release.”

Japan is China’s second-biggest trading partner after the U.S., with two-way commerce in the first seven months of the year rising 25 percent from the same period in 2009 to $65.2 billion, Chinese customs data show. China is Japan’s largest trading partner, buying 10.2 trillion yen ($121 billion) of the nation’s goods and services last year.

China is tightening inspections of shipments to and from Japan causing delays for car parts and machinery deliveries, possibly in response to the diplomatic friction, the Asahi newspaper reported today, without citing anyone.

Japan has “severely infringed” on China’s territorial sovereignty and the personal rights of Chinese citizens, Foreign Ministry spokeswoman Jiang Yu said on Sept. 25, according to the state-run Xinhua news agency. China has the right to seek an apology, she said.

‘No Intention Whatsoever’

“I have no intention whatsoever of accepting” such a demand, Kyodo News quoted Japanese Prime Minister Naoto Kan as saying yesterday. “The Senkaku islands are Japan’s own territory.”

The decision by prosecutors to release the captain, citing Japan-China ties as a contributing factor, drew criticism from ruling Democratic Party of Japan lawmakers as well as opposition politicians.

“The only thing that can be said about the judgment is that it was extremely regrettable,” 73 DPJ legislators including Yoichi Kaneko and Jin Matsubara said in a joint statement today. The group “strongly supports” the rejection of any compensation for China.

Nobuteru Ishihara, secretary-general of the opposition Liberal Democratic Party, yesterday on NHK Television called the release “totally unacceptable.” He said he would summon officials to testify in parliament.

Local editorials also questioned the outcome.

Japan ‘Gives In’

“The decision gave the impression that the Japanese government had given in and failed to stick to its original stance,” the Yomiuri newspaper, Japan’s largest daily, said in a Sept. 25 commentary.

The trawler and crew were seized after the boat collided with the two Coast Guard vessels on Sept. 7 near the islands. Japan released the 14 crew members and allowed the boat to leave on Sept. 13.

China cut off ministerial talks with Japan and Premier Wen Jiabao last week said there would be further retaliation unless the captain, Zhan Qixiong, was freed. China last week detained and is questioning four Japanese employees of construction company Fujita Corp. for allegedly videotaping military targets.

The diplomatic row is the most serious since 2005, when thousands of Chinese protested Japanese textbooks that downplayed the nation’s wartime atrocities. The captain’s detention sparked a Sept. 18 protest outside Japan’s embassy in Beijing that was more tightly controlled by police than those five years ago, when demonstrators threw rocks at the consulate in Shanghai.

China surpassed Japan as the world’s second-largest economy last quarter. The Japanese nominal gross domestic product for the second quarter totaled $1.288 trillion, less than China’s $1.337 trillion, according to Japanese government statistics.

To contact the reporter responsible for this story: Takashi Hirokawa at thirokawa@bloomberg.net

To contact the editor responsible for this story: Bill Austin at billaustin@bloomberg.net

Bloomberg reserves the right to edit or remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.