China-Japan diplomatic clash weighs on the Nikkei
After Beijing advises against travel to neighbouring country, tourism-related stocks plummet
From our correspondent
NEW DELHI - High diplomatic tensions between China and Japan reverberated on Monday morning on the Tokyo Stock Exchange, causing tourism-related stocks to plummet after the Beijing government advised its citizens against travel to the neighbouring country. Among the hardest hit stocks were airlines and retailers: Japan Airlines closed at -3.75 per cent; Ana Holdings (All Nippon Airways) lost 3.35 per cent; Isetan Mitsukoshi, which among the big players in the shopping mall sector is probably the one most exposed to Chinese customers, slumped 11.31 per cent. In the retail sector, sharp falls were also seen for Ryohin Keikaku (Muji), which lost 9.39%, and Fast Retailing (which through Uniqlo controls around 900 shops in China), which closed down 5.29%. Shiseido also fell (-9.08%). The declines did not spare even Oriental Land (-5.68%), the company that operates Tokyo Disneyland, and Kyoritsu Maintenance (-8.14%), present in the hotel sector. Overall, the Nikkei absorbed the shock, closing slightly lower (-0.10%) than on Friday, but a Chinese boycott could weigh. According to an estimate by Takahide Kiuchi, executive economist at the Nomura Research Institute, the equivalent of USD 14.23 billion a year is at risk, which would be enough to shave 0.36 per cent off GDP.
To bring into focus the reasons for the crisis that has erupted between the two countries, we have to go back to last Friday, 7 November, when - reporting in Parliament - Japanese Prime Minister Sanae Takaichi said that a Chinese attack on Taiwan could jeopardise 'Japan's survival' and make it necessary for Tokyo to take military action. The Japanese nationalist leader's words came just days before the inauguration of Fujian, China's third and most sophisticated aircraft carrier, which in a hypothetical conflict with Taiwan could play a crucial role in limiting external military intervention in favour of Taipei.
Takaichi's stance was followed by a series of increasingly violent attacks from Beijing. First from the Consul General in Osaka, then from a Foreign Ministry spokesman, and finally from the Ministry of Defence, which spoke of a 'crushing defeat' for Japan should it decide to intervene militarily on Taiwan's side. When the diplomatic skirmishes were followed by an invitation not to visit Tokyo, the clash also began to have economic and financial reverberations. Not least because about a quarter of tourist arrivals in Japan come from China, a phenomenon that the weakness of the yen has only encouraged. In September alone there were 650,000, second only to the South Koreans. According to data from the Japan Tourism Agency, Chinese people visiting Japan spent more than anyone else last quarter: the equivalent of $13.6 billion, about 27% of the total number of foreigners in the country. Cirium estimates that Chinese travellers today account for about 15% of seats sold by Japanese airlines on international routes.
According to Japanese press reports, the Takaichi government sent one of its highest-ranking diplomats to China on Monday to try to mend the rift with Beijing. Should the mission of Masaaki Kanai - who is the director general for Asia and Oceania at the Foreign Ministry - fail, the fallout would be felt far beyond the tourism sector. According to Alicia Garcia-Herrero, chief economist for Asia Pacific at Natixis, one area where Tokyo remains vulnerable is in the area of rare earth supplies.
