The Associated Press September 27, 2010, 7:47AM ET

Panasonic boss urges end to Japan-China dispute

Panasonic Corp.'s president called on the Japanese government Monday to patch up relations with China, a key nation for the electronics maker's sales as both sides traded angry demands for damages over a territorial dispute.

The spat began over the detention of a Chinese fishing-boat captain near disputed islands for which both nations claim territorial rights. In apparent retaliation, China has stepped up customs inspections of goods shipped to and from Japan, slowing trade.

"I ask for consideration that, in this global world, we are doing business together, and we hope the government will find a path toward resolution," Panasonic President Fumio Ohtsubo told reporters at a reception at a Tokyo hall. "We need to trust each other, and we need to accept differences," he said.

Ohtsubo said Panasonic is already struggling to cut costs and fight the rising yen, which batters the value of overseas sales for Japanese exporters.

But the souring of relations with China was something he had not expected, and he was worried about the damage, especially if the problem continues.

"There are visible risks to watch out for, but it is even more dangerous when we face invisible risks," he said of the brewing dispute.

Panasonic is among the biggest Japanese investors in China and has several plants there. It is also banking on the huge Chinese market for its products, which include Viera plasma TVs and Lumix digital cameras as well as solar panels and batteries for hybrid cars.

Beijing reacted angrily to the Sept. 8 detention of a Chinese fishing boat captain after a collision with two Japanese coast guard vessels near a group of disputed islands known as the Diaoyus to China and the Senkakus to Japan.

Beijing cut off minister-level dialogue with Tokyo and postponed talks on developing undersea gas fields between the two nations. The captain was released Friday and returned home, but Beijing is pressing for an apology and compensation. Japan has rejected those demands and asked China to pay for the damage to its patrol boats.

Japanese trading company officials say, starting last Tuesday, China had halted exports to Japan of rare earth elements, which are essential for making high-tech products. China's Trade Ministry denied that Beijing had tightened curbs.

Ohtsubo said there was no effect so far on Panasonic's operations, partly because it has inventories of components that use rare earths.

Still, the company has been exploring the possibility of importing from other nations and also working on developing alternative materials internally, he said.

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AP Business Writer Joe McDonald in Beijing contributed to this report.


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