Tuesday, September 18, 2012

Japanese hunker down in China as protests reignite

By Ben Blanchard and Antoni Slodkowski

BEIJING/TOKYO (Reuters) - Japanese businesses shut hundreds of stores and plants and the country's embassy suspended services in China on Tuesday as anti-Japan protests reignited and risked dragging a territorial dispute between Asia's two biggest economies deeper into crisis.

Demonstrators burn a crossed-out Japanese national flag during a protest in Xi'an, Shaanxi province September 15, 2012. Thousands of Chinese besieged the Japanese embassy in Beijing on Saturday, hurling rocks, eggs and bottles with protests reported in other major cities in China amid growing tension between Asia's two biggest economies over a group of disputed islands. REUTERS/Rooney Chen

Two Japanese nationals landed on one of the islands at the centre of the dispute, Japan's coast guard said, raising tensions in an area already patrolled by ships from both nations and increasing fears of direct clashes.

China's worst outbreak of anti-Japan sentiment in decades has led to protests and attacks on Japanese companies such as car makers Toyota Motor Corp and Honda Motor Co, forcing them to halt operations.

Other well-known Japanese firms -- from Mazda and Mitsubishi Motors to Panasonic and Fast Retailing -- also shuttered plants and stores in China, sending Japanese share prices falling and prompting a warning from credit rating agency Fitch that the situation could hurt some auto and tech firms' creditworthiness.

Hitachi Construction Machinery recalled 25 Japanese workers back to Japan because of the unrest.

"My family and my husband, who is currently in Japan on business, are worried about us being here," said Mutsuko Takebayashi, a Japanese expatriate housewife living in Shanghai who planned to take her family back to Japan on Tuesday.

"It's possible that Japanese companies will start evacuating families back home and if that happens it'll be too late to book tickets. That's why I'm going back today," she said.

Japanese restaurants, a common target of protesters, barred their doors while many Japanese expatriates stayed inside, afraid that Tuesday's anniversary of Japan's 1931 occupation of parts of mainland China could lead to outbreaks of violence.

As demonstrators across the country took to the streets, carrying Chinese flags and portraits of Mao Zedong, Chinese police issued warnings against unruly behaviour, although state-run media struck a more hostile tone, linking the territorial dispute with bitter memories of Japanese occupation.

"Wipe out all Japanese dogs," read one banner held aloft by one of thousands of protesters marching on the Japanese embassy in Beijing, which was ringed by riot police standing six rows deep. In southern Guangzhou, protester Wang Qian held a banner reading "Japan is a dog of the Americans".

JAPANESE LAND ON DISPUTED ISLAND

Tensions were also high out at sea, around the disputed group of uninhabited islets at the centre of the row. In the East China Sea, the islands are called the Senkaku by Japan and Diaoyu by China and are near potentially large gas reserves.

Two Japanese nationals briefly landed on one of the islands, having paddled up to it in a rubber raft and swam ashore before returning to the boat, Japanese broadcaster NHK said.

A flotilla of around 1,000 Chinese fishing boats is also reported by Chinese and Japanese media to be heading to the area. Japan said a Chinese fishing patrol boat had broadcast a radio message declaring the waters to be Chinese territory and asking Japanese Coast Guard vessels to leave. It was not clear how many of the Chinese boats had reached the area.

In 2010, a bilateral crisis over the islands erupted after a fishing boat collided with a Japanese Coast Guard vessel.

The Japanese government has set up an information-gathering operation to monitor the movements of the Chinese fishing boats.

INVESTORS TAKE FRIGHT

The long-standing territorial dispute erupted last week when the Japanese government decided to nationalise some of the islands, buying them from a private Japanese owner.

The dispute has sent China-exposed Japanese stocks down heavily on the Tokyo stock market, raising concerns about any wider impact on economic and trade ties between the two countries. [ID:nL3E8KH1AS] Platinum prices also fell, partly on the disruption to Japanese car plants in China, traders said. The precious metal is used as an auto catalyst. [ID:nL3E8KI03Z]

China, the world's second-largest economy, and Japan, the third-largest, have total two-way trade of around $345 billion.

There is no talk of Japanese firms withdrawing investment from China but some experts believe anti-Japan sentiment could prompt companies to rethink their investments in China in the longer term.

"Withdrawal is impossible but the cost of doing business in China clearly has become much higher so that cost calculation should affect (decisions)," said Yoshihide Soeya, director of the Institute of East Asian Studies at Keio University in Tokyo.

Mazda Motor Corp has temporarily halted production at its Nanjing factory, which it jointly operates with Chongqing Changan Automobile Co Ltd and Ford Motor Co.

Mitsubishi Motors Corp said it would also halt operations at one of its China factories, a joint venture with the Guangzhou Automobile Group Co, on Tuesday, while Yamaha Motor Co also said it was suspending operations at four plants in China.

Toyota and Honda said arsonists had badly damaged their stores in the eastern port city of Qingdao at the weekend, prompting Toyota to halt operations at some factories in China.

Electronics group Panasonic Corp said it was closing three China factories after two were attacked by mobs and a third, in south-eastern Zhuhai, was sabotaged.

Japanese supermarket operator Aeon closed all but five of its 35 stores in China on Tuesday, while clothing retailer Fast Retailing shut about a quarter of its 145 Uniqlo stores in mainland China for the day. Building machinery maker Komatsu halted three plants in Shandong province.

The anti-Japan protests reignited just as the United States, a strong ally of Japan, sends Defense Secretary Leon Panetta on a visit to both countries this week. Panetta has said Washington will not take sides in the territorial dispute and has urged calm and restraint to prevail.

But the rhetoric from Chinese state media struck a different note. Beijing's mouthpiece, the People's Daily, said in a commentary Japan's actions showed "it has not sincerely repented its past of wars of invasion and of colonial rule".

Despite the tension, some Japanese firms said it was largely business as usual on Tuesday, with NEC Corp, Toshiba Corp and Fujitsu Ltd saying operations were running as normal. Mitsubishi Electric said it had merely closed a sales office in Shanghai. (Additional reporting by Kiyoshi Takenaka, Tim Kelly and Linda Sieg in TOKYO, Kazunori Takada, John Ruwitch and Carlos Barria in SHANGHAI, James Pomfret in GUANGZHOU, and Max Duncan and Chris Buckley in BEIJING; Editing by Paul Tait)

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News

Tuesday, September 18, 2012

Japanese hunker down in China as protests reignite

By Ben Blanchard and Antoni Slodkowski