Chinese Ships Move Away From Islands Disputed With Japan

Six Chinese patrol vessels moved away from what Japan says are its territorial waters near islands claimed by the two countries, as nationalist sentiment over the dispute damped trade and tourism.

Japan’s Foreign Ministry had earlier summoned Chinese ambassador Cheng Yonghua to demand that the ships leave and that the Chinese government ensure the safety of Japanese nationals after reports of attacks on people in Shanghai.

“All the Chinese ships left Japan’s territorial waters by 1:30 p.m.,” Japanese Chief Cabinet Secretary Osamu Fujimura told reporters in Tokyo today.

The dispute between Asia’s two largest economies over the uninhabited islands, known as Senkaku in Japanese and Diaoyu in Chinese, intensified this week when Japan announced it had bought the islands from a private Japanese landowner. China said it didn’t accept the move and sent patrol vessels to the area.

Fujimura said that an intrusion by six ships was unprecedented. One of the Chinese ships issued a radio message in Japanese saying it was on official business and ordering Japan’s ships to leave, Japan’s coast guard said in a statement.

“Waters off the Diaoyu Islands are waters under China’s jurisdiction,” Chinese Foreign Ministry spokesman Hong Lei said at a briefing in Beijing today. Chinese surveillance ships patrolling “in relevant waters is normal performance of duty and is indisputable.”

Trade Damage

The incident today follows tit-for-tat visits to the islands by activists from Hong Kong and Japan last month, which inflamed tensions. Another group of activists from Hong Kong is expected to sail to the isles on Sept. 18, the Hong Kong-based Ming Pao newspaper reported today, citing a ship owner involved in the previous trip.

The dispute is hurting bilateral trade at a time when both countries are 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.

“I don’t think China wants to make things worse in the run-up to the party congress,” said Ikuo Kayahara, a retired major-general in Japan’s defense forces and emeritus professor of Takushoku University in Tokyo. “If the people’s nationalism is awakened, this could turn into something that even China’s dictatorship cannot control.”

Tourism Industry

Japan’s consulate in Shanghai issued a safety alert for Japanese nationals in China, saying on its website that a number of Japanese citizens have been attacked.

In Shanghai, Honda Motor Co. (7267) said police had taken a person into custody in connection with the burning of a Civic compact car in front of one of its dealerships.

Japan may see as much as a 20 percent drop in Chinese visitor numbers because of the dispute, 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 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.”

LDP Race

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

Four of five lawmakers running in the Sept. 26 election to head Japan’s opposition LDP have vowed to build on the disputed islands, which are close to gas reserves and rich fishing grounds. Prime Minister Yoshihiko 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. Japan has been trying to beef up its relationships with other Asian countries as China’s military might grows. Japan and Australia agreed today to boost defense ties with the U.S. and jointly called on China to increase transparency in its military.

To contact the reporters on this story: Isabel Reynolds in Tokyo at ireynolds1@bloomberg.net; Takashi Hirokawa in Tokyo at thirokawa@bloomberg.net

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

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