Japan's Balancing Act in Asia

How Political Tensions in Asia are Impacting Expansion Plans for Japanese Businesses Overseas

Global Risk & Investigations Practice (GRIP)

November 1, 2013

In September 2012 the Japanese government purchased three of the Senkaku Islands, a group of uninhabited islands known as the Diaoyu Islands in China and the Tiaoyutai Islands in Taiwan, from what they considered their private owner. The Islands have been part of a long running territorial dispute with  Japan, China and Taiwan all asserting their claim over the land. So it was little surprise that this purchase was the cause of large scale, often violent protests in China, with anti-Japanese sentiment publicly displayed and Japanese businesses and goods vandalized and boycotted.

During the height of tensions, major Japanese companies such as Canon, Panasonic, Mitsumi and Lion Corporation temporarily suspended factory operations in China. Similarly, carmakers Toyota, Nissan and Honda also reduced production at factories by up to 50%.

A recent Nikkei Inc. survey of 129 Japanese companies operating in China found that 70% were directly affected by the situation, some with violent instances. Around 72% of companies saw a decline in sales and 41% said customer growth suffered. 24% experienced issues in dealing with public institutions or state owned firms, while 80% still claim to be suffering from anti-Japanese sentiment in China.

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