Japanese tourism and retail stocks plummeted on Monday after China warned its citizens to avoid traveling to Japan. The advisory follows a diplomatic spat sparked by comments from Japanese Prime Minister Sanae Takaichi about Taiwan. Takaichi, known as a China hawk, suggested that Japan could intervene militarily if the self‑ruled island were attacked, a claim that China rejects as it regards Taiwan as its own territory.
China is Japan’s largest source of tourists, with nearly 7.5 million Chinese visitors in the first nine months of 2025. Those tourists spent about 590 billion yen ($3.8 billion) in the third quarter, accounting for 28 % of all foreign tourist spending. Japan was also the fourth‑most popular destination for Chinese tourists last year, contributing to a record number of foreign arrivals.
The dispute immediately affected Japanese equities. Cosmetics firm Shiseido saw its shares fall as much as 11.4 %. Department‑store group Takashimaya and Pan Pacific, the owner of discount retailer Don Quijote, dropped 6 % and 8.4 % respectively, while Uniqlo owner Fast Retailing, which has a substantial presence in China, slipped nearly 6 %.
Tensions have been rising since Takaichi’s remarks, made just days after her meeting with Chinese President Xi Jinping. In response, the Chinese government summoned the Japanese ambassador and advised its citizens to avoid Japan, citing safety concerns. Japan’s Chief Cabinet Secretary Minoru Kihara called the announcement “incompatible with the broader direction agreed upon by the leaders of the two nations.”
The diplomatic row could have significant economic implications for Japan, which is already grappling with a sluggish economy. The country’s GDP contracted by 0.4 % in the third quarter, and analysts warn that the tensions could evolve into a full‑blown trade dispute, potentially involving Chinese restrictions on rare‑earth exports or limits on Japanese goods—measures that would hit the Japanese car industry hard. The situation is being closely monitored, with Japan’s top foreign‑ministry official for Asia‑Pacific affairs traveling to China for talks with his counterpart. The outcome of this dispute will have far‑reaching consequences for Japan’s economy and its relationship with China.
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