Chinese Ships Enter Waters Near Islands Disputed With Japan

Six Chinese government ships entered what Japan sees as its territorial waters close to islands disputed by the two nations, heightening nationalist sentiment in a standoff that's damping trade and tourism.

Two ships have since left the area and the other four are being urged to do so, Japan’s coast guard said in a statement. Another two vessels were seen in nearby waters, Japanese broadcaster NHK reported. China’s official Xinhua News Agency said two Chinese surveillance fleets are patrolling around the islands, which are in areas rich in gas and fishing grounds.

“The fact that there has been an incursion into our territorial waters is extremely regrettable,” said Chief Cabinet Secretary Osamu Fujimura. “We are strongly urging the Chinese side to withdraw immediately.”

The dispute is hurting trade between Asia’s two biggest economies at a time when each is struggling to cope with a global economic slowdown. It also comes as China’s Communist Party prepares for a generational leadership change and has become an issue in the race to lead Japan’s main opposition Liberal Democratic Party.

The row over the uninhabited islands, known as Senkaku in Japanese and Diaoyu in Chinese, escalated this week when the government of Prime Minister Yoshihiko Noda announced it had bought them from their private Japanese owner. China said it didn’t accept the move.

Japan’s consulate in Shanghai issued a safety warning to Japanese nationals in China, saying on its website that a number of Japanese citizens have been attacked as the territorial dispute simmers.

Fewer Tourists

Japan may see as much as a 20 percent drop in Chinese visitor numbers because of the row, according to the Japan National Tourism Organization. Ctrip.com International Ltd. (CTRP), owner of China’s biggest travel portal, has halted Japan promotions ahead of a weeklong Chinese holiday starting Oct. 1.

A slump in demand from its second-biggest overseas market would add to the difficulties facing Japan’s tourism industry as it tries to recover from last year’s tsunami and nuclear-power crisis.

“We are very worried,” Mamoru Kobori, the tourism agency’s overseas marketing manager, said by phone yesterday. “There will surely be an impact on the numbers and the only question is how much -- 10 percent or 20 percent is possible.”

Nissan Motor Co. (7201) has pared marketing events in China because of anti-Japanese demonstrations prompted by the islands dispute, Chief Operating Officer Toshiyuki Shiga said Sept. 6. Chief Executive Officer Carlos Ghosn said in an interview yesterday there hasn’t been a significant impact on the Japanese carmaker’s sales.

Four of five lawmakers running in the Sept. 26 election to head Japan’s opposition Liberal Democratic Party have vowed to build on the disputed islands. Noda has no construction plans on the islands and has called for calm.

Both countries are also mired in territorial disputes with other Asian neighbors.

To contact the reporter on this story: Isabel Reynolds in Tokyo at ireynolds1@bloomberg.net

To contact the editor responsible for this story: Peter Hirschberg at phirschberg@bloomberg.net

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