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Tensions between Japan and Taiwan have drawn renewed attention over the past few months, as both economies continue to navigate regional security challenges while deepening economic cooperation. Even though the situation has not escalated into direct conflict, several developments, from military activity near shared waters to increased geopolitical signalling have amplified concerns among businesses operating across Asia-Pacific.
How it Happened:
According to CNA, China has called Japan’s plan to deploy missiles on an island near Taiwan as a deliberate attempt to “create regional tension and provoke military confrontation” on 24 November, as a diplomatic dispute simmers between the two nations.
The remarks come amid their worst diplomatic crisis in years, after Japanese Prime Minister Sanae Takaichi said this month (November 2025) a hypothetical Chinese attack on democratically governed Taiwan could trigger a military response from Tokyo.
How it Affects Businesses in Both Countries
A China Daily report highlighted that the escalating tensions have great significance for both countries. China has halted Japanese seafood imports, suspended the release of two Japanese films and major Chinese airlines have cancelled flights to Japan.
Hidetoshi Tashiro, a Japanese economist, said that Takaichi’s remarks could trigger serious fallout, with China already warning its citizens against travel and study in Japan and tour cancellations underway.
“Even more serious is that companies in both Japan and China may come to share the expectation that bilateral relations will become unstable going forward, which could dampen their willingness to engage in trade and investment between the two countries,” said Tashiro.
How Risk Managers View the Escalating Japan–China Tensions
Steve Tunstall, who has over 30 years of experience in risk management, shared his perspectives on the rising tensions.
“I think this has the potential to become a long-term structural issue for the region,” he said, emphasising that risk professionals must monitor the situation closely.
“If this blows up into a bigger issue, everybody in the world of trade is going to be affected.”
Steve also highlighted the recent phone call between Trump and Xi, widely seen as a signal of Beijing reasserting its Taiwan position and a caution to Tokyo, as a moment that underscores how high-level diplomacy is now tightly linked with regional economic stability.
According to CNA, analysts noted that the Trump–Xi conversation highlights leader-level diplomacy as a crucial tool for setting guardrails and signalling intent during periods of heightened tension.
What to Look Out For in 2026
When asked about the top risks to watch in 2026, Steve highlighted geopolitics, climate, and technology as the key areas of concern.
“Geopolitics will be at the top of my list. The implications of climate change, especially for Asia, are profound. And the third big risk is technology, as organisations must ensure they remain resilient against increasing cyber and technology-related threats.”
He concluded by stressing the importance of staying well-informed.
“Risk managers need to tap into multiple sources and understand every angle behind emerging developments.”
Looking ahead to 2026, organisations can expect a more uncertain regional environment shaped by geopolitical tension, supply chain vulnerabilities, and evolving cyber threats. Potential shifts in trade policy, shipping routes, and high-tech competition may add pressure to operations across Asia-Pacific. As risks become more interconnected, proactive monitoring and scenario planning will be essential for maintaining resilience in the year ahead.
