Dec. 27 (Bloomberg) -- Chinese President Xi Jinping’s reaction to Japanese Prime Minister Shinzo Abe’s visit to a shrine that honors wartime leaders will determine whether Asia’s top two economies come closer to a hostile incident.
Xi’s options after Abe’s appearance yesterday at Yasukuni shrine -- the first by a sitting prime minister since 2006 -- range from sticking with verbal condemnation to unleashing public anti-Japanese protests to stepping up naval or air challenges against Japan’s forces in the East China Sea.
Xi and Abe, 15 months apart in age and about one year in to their leadership terms, are overseeing expansions in their militaries, with the two nations locked in a dispute over islands that hinder China’s access to the western Pacific Ocean. Xi, 60, must navigate demands from those pushing for a swift backlash against the need to control social unrest. For Abe, the visit which drew disappointment from the U.S., Japan’s top ally, risks resumed damage to Japanese business in China.
“It is going to aggravate the already tense situation,” Dorothy Solinger, a professor of politics at the University of California, Irvine, said of Abe’s visit, which drew a written protest from the Chinese Foreign Ministry within an hour. “Anti-Japanese protests and popular -- though at least indirectly regime-instigated -- boycotts could ensue,” Solinger said. Such a reaction “is more likely than military or official economic moves,” she said.
Tensions have been running high over the last year as China and Japan sent planes and ships to trail each other around islands in the East China Sea claimed by both sides. Japan’s decision to buy some of the islands from their private owner in September, 2012 provoked street protests and attacks on Japanese businesses, damaging a $366 billion trade relationship.
Any concern at increased strains between the two countries didn’t stop Japan’s benchmark stock index from closing at the highest level since 2008 yesterday. The Topix advanced 0.3 percent as of 9:34 a.m. in Tokyo, adding to a 1.7 percent advance yesterday.
In an interview earlier this month, Abe, 59, called for a summit with Xi to reset relations. His visit to Yasukuni all but eliminates the possibility of high-level talks, according to Taylor Fravel, a professor at Massachusetts Institute of Technology who studies China’s ties with its neighbors.
“Xi will almost certainly not meet with Abe as long as Abe is prime minister,” Fravel said. “Few substantive agreements will be reached, especially those sorely needed for crisis management.”
In November, China established an Air Defense Identification Zone over the islands, drawing criticism from Japan, the U.S. and South Korea. Vice President Joe Biden visited the region in early December, asking Japanese and Chinese leaders to “lower the temperature” in their dispute.
The U.S. is “disappointed” that Japan’s leadership took actions that will exacerbate tensions, the U.S. Embassy said in a statement on its website yesterday. The European Union’s foreign-policy chief, Catherine Ashton, said in a statement that the action was “not conducive to lowering tensions in the region or to improving relations” with neighbors.
Abe visited Yasukuni on the one-year anniversary of his second ascension to power and the 120th birthday of Mao Zedong, with Chinese leaders including Xi honoring the founder of the communist state. Xi, the son of a fighter in Mao’s revolution who was purged in 1962 and went on to become a vice premier after his rehabilitation, must balance the demands of people angry with Japan’s actions against the need for stability.
Economic growth may slow to 7.5 percent next year, the lowest since 1990, according to analyst estimates.
“Xi Jinping has to walk a tightrope,” said Huang Jing, a professor at the National University of Singapore who focuses on Chinese politics. “Sometimes a radical force has to be contained by radical responses. Xi Jinping also has a country to preside over and there are also complaints that he’s too soft.”
During last year’s protests, hundreds of demonstrators marched outside the Japanese embassy in Beijing, while Toyota Motor Corp. and Honda Motor Co. reported that dealerships in the country were damaged by fire.
Yasukuni honors dead including 14 World War II leaders convicted as Class-A war criminals, such as Hideki Tojo, who was a prime minister and war minister in the 1940s.
“Abe’s actions are taking Japan in a very dangerous direction,” Foreign Minister Wang Yi said yesterday when he summoned Japanese Ambassador Masato Kitera over the visit.
Abe is a grandson of Nobusuke Kishi, a wartime commerce minister who served as prime minister in the 1950s. His visit comes as his popularity falls at home. A poll published by the Mainichi newspaper on Dec. 24 found 49 percent of respondents supported Abe’s administration, down five percentage points from November and the first Mainichi poll below 50 percent since his election win.
The visit also comes amid a broader military buildup by both nations. Abe increased his nation’s defense budget in 2013 for the first time in 11 years and the Defense Ministry wants another budget increase for next year, a move that would return military spending to its highest level since 2005.
China, which now has the world’s second biggest military budget behind the U.S., deployed its first aircraft carrier in September 2012, and has made advances in stealth, drone and naval technology in recent years. Its defense spending was set to grow 10.7 percent this year.
“China will take a harder line over the issue of the Diaoyu Islands,” said Shi Yinhong, a professor of international relations at Renmin University in Beijing. “China will continue to develop its military power, especially long-range firing capabilities, with Japan as the target.”
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