Bloomberg News

Japan Should Acknowledge Islands in Dispute, Lawmaker Kato Says

October 03, 2012

Japan should acknowledge that the sovereignty of islands also claimed by China is in dispute as a first step to stemming the financial toll from spreading, according to a Japanese lawmaker.

“The Chinese economy is slowing down, affected by the European debt crisis,” Koichi Kato, former secretary general of the main opposition Liberal Democratic Party and chairman of the Japan-China Friendship Association, said in an interview in Tokyo this week. “Against this backdrop, the strained Japan- China political relations will deal another blow to the economies of both countries.”

Chinese patrol ships yesterday entered disputed waters for a second day as the row over the islands -- known as Senkaku in Japan and Diaoyu in China -- threatens to undermine 40 years of diplomatic ties and a $340 billion trade partnership between Asia’s two largest economies. Japanese Prime Minister Yoshihiko Noda has denied the existence of any territorial dispute and vowed no compromise.

Demonstrations in China turned violent last month as angry protesters smashed Japanese-branded cars and torched Toyota Motor Corp. (7203) and Honda Motor Co. (7267) dealerships, while Fast Retailing Co. (9983), owner of the Uniqlo clothing brand, closed its outlets in Beijing to avoid mob attacks.

Tensions between the two countries escalated after Japan purchased the islands a day after Noda met with Chinese President Hu Jintao on the sidelines of the APEC meeting in Vladivostok, Russia, last month.

‘Emotional Criticisms’

“China felt Noda is not a trustworthy person,” said Kato, 73, who was part of a Japanese delegation to China last month. “If Japan doesn’t make some special effort to defuse the situation, it would be difficult to amend the relations.”

Kato met with Politburo member Jia Qinglin and attended a banquet hosted by Tang Jiaxuan, former state councilor and chairman of the China-Japan Friendship Association. Both Jia and Tang expressed the importance of healthy ties between the two countries, Kato said.

The current feud threatens the agreement between Chinese premier Zhou Enlai and Japanese Prime Minister Kakuei Tanaka 40 years ago to shelve the dispute over the islands, which paved the way for the normalization of diplomatic ties, Kato said.

“If this is broken, ties in economy as well as politics will fall apart,” Kato said. “Bad economic data is just beginning to show.”

China Slowdown

China’s services industry expanded the least in more than a year, a report showed yesterday, underscoring a slowdown that spurred the Asian Development Bank to lower its 2012 regional growth estimate.

Political transitions in both nations may prolong what’s become the worst diplomatic crisis since at least 2005. Hu is poised to hand power to the next generation of China’s leaders next month, forecast to be led by current Vice President Xi Jinping. Noda faces elections as soon as this year and the LDP last month chose as its leader to be ex-premier Shinzo Abe, who advocates building on the islands to assert sovereignty.

Kato said he is unclear what Xi’s foreign policies will be or whether a possible future Japanese government led by Abe is able to break the impasse.

“If Japan treats the bilateral relations seriously and carefully, the situation could turn better,” said Kato, a vocal opponent of former Prime Minister Junichiro Koizumi’s annual visits to the Yasukuni Shrine, where convicted war criminals are honored along with other war dead.

To contact the reporters on this story: Ma Jie in Tokyo at jma124@bloomberg.net; Yuki Hagiwara in Tokyo at yhagiwara1@bloomberg.net

To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net


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