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China-Japan relations in Washington’s shadow

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In the Asia-Pacific region, the China-US conflict remains intense. Beijing is responding to Washington’s attempt to surround China through regional actors, by strengthening its military and economic position in the region.

This contention, which international relations experts called ‘competition’ and China rejected the definitions of ‘competition’ and ‘power struggle’, was also reflected in the Asia-Pacific Economic Cooperation (APEC) Leaders’ Summit held in Thailand last week.

In her speech at the summit, U.S. Vice President Kamala Harris underlined Washington’s message that ‘we are here to stay’, referring to its long-term plans and goals in the Indo-Pacific, while Chinese President Xi Jinping stressed that the Asia-Pacific “is nobody’s backyard”. Unlike Harris, Xi’s use of the term “Asia-Pacific” instead of “Indo-Pacific” was another notable message.

The United States, Britain and Australia formed the AUKUS alliance in September last year to suppress China in Asia-Pacific, which attracted a huge reaction from Beijing. The Chinese government said the pact would seriously damage regional peace and stability.

Japan recently announced that it will sign a military agreement with UK for security co-operation in the Asia-Pacific region. It was commented that this pact was a step that could pave the way for UK in the Pacific and expand AUKUS at the same time. As a matter of fact, the U.S. is planning to include Japan and even Canada in the AUKUS alliance against China soon.

‘Maritime’ agreement from the leaders of China and Japan

China, on the other hand, is trying to overcome the surrounding in Asia-Pacific by strengthening economic relations in the region. Chinese President Xi Jinping discussed the issue with Japanese Prime Minister Fumio Kishida in Bangkok, saying they were aiming to build a regional economic cooperation architecture. They agreed to deepen maritime dialogue, manage differences over Taiwan and territorial disputes, and open a military helpline. Just days after the meeting, the two countries exchanged their views on maritime affairs via video conferencing, and officials pledged to “earnestly implement” the agreement reached by the leaders of the two countries.

Bilateral relations have worn out in recent months as Japan increased its alignment with the U.S. over sensitive issues such as Taiwan, Hong Kong, and Xinjiang. However, the two leaders’ 45 minutes of warm talk during the APEC summit rekindled hopes between the two countries.

Despite this, Tokyo today has accused Beijing of entering Japanese territorial waters in the East China Sea.

Tokyo economists are concerned

Japan’s business community, which has an important position in the U.S. strategy of surrounding China, is worried about the “huge losses” from the decoupling from China. Japanese economists and businessmen are discussing the cost of this disintegration as Washington attempts to urge Tokyo completely cut ties with Beijing.

Speaking to the Global Times recently, Japanese experts pointed out that “the full ‘decoupling’ of the Japanese and Chinese economies will be extremely costly, and both countries may lose in the end,” and stressed that “so-called political interests should not precede national interests.”

Japanese media outlet Nikkei Asia reported that Japanese companies are trying to structure supply chains without dependence on China amid China’s growing conflict with the U.S. However, it is stated that this policy will significantly increase the cost of all kinds of products.

In August, it is reported that Honda launched a project to restructure its large-scale supply chain to explore the possibility of producing cars and motorcycles without being dependent on Chinese-made parts. However, China accounts for more than 30 per cent of Honda’s global sales. According to Nikkei Asia, the company’s “policy of making China the basis of its earnings” will not change in the future. The report highlights that the giant carmaker doesn’t currently intend to separate from China but is preparing for potential risks.

Speaking anonymously to the Global Times, a Japanese executive said the Japanese government plans to incorporate the concept of “economic security” into its national security strategy, essentially expanding its scope of security and “intentionally keeping pace with the US.”

Based on studies conducted at Waseda University, production of about 53 trillion yen ($360 billion) could disappear if the Japanese economy breaks away from China, Nikkei Asia reported. This means a loss of about 10 per cent of Japan’s gross domestic product. China accounts for 26 per cent of Japan’s total imports, while the U.S. is behind China with 19 per cent. According to Japanese statistics, China is Japan’s largest trading partner since 2007.

In addition, one of Japan’s main export targets is China. Japan exports semiconductors, chemicals, and many other products to China. It is reported that the Washington administration have asked Tokyo to take action to impose restrictions on its semiconductor exports to China. Forcing Japan to separate from China may also lead to the loss of Japan’s most important export market. It is not clear whether Japanese politicians will risk this loss, but it seems that economists and industrialists will continue to put pressure on the government to do so.

Asia

China expands Africa arms sales, displacing France and Western rivals

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China is overtaking Western suppliers, particularly France, by expanding its exports to African nations beyond small arms, armoured vehicles, trucks, and artillery to include air defence systems, combat drones, and electronic warfare assets.

According to a report by the South China Morning Post, based on researchers and military movements across the region, African buyers are gravitating towards the advantages of quality and accessibility offered by the Beijing administration.

In April, four vehicles spotted in a Malian army convoy were identified by defence intelligence company Janes as Chinese-manufactured Yitian-L air defence systems.

In September, the Presidency of Burkina Faso published footage of military equipment inspections and testing.

Observers noted that the released footage featured a mobile surveillance radar and a missile launch vehicle belonging to the Sky Dragon family produced by Chinese company Norinco.

In August, Cote d’Ivoire also showcased Wing Loong II armed unmanned aerial vehicles procured under a contract signed in June 2024 with Chinese state-owned enterprise Catic.

A distinct shift is unfolding in the weapons procurement trajectory of Sahel countries that have ended defence cooperation with France and run into US security assistance restrictions.

Mali, Burkina Faso, and Niger formed the Alliance of Sahel States in September 2023, transitioning the structure into a confederation in July 2024.

Following the transfer of power to military authorities, these nations progressively severed ties with France and turned their attention towards new partnerships.

Western bans and budget constraints pave way for Beijing

David Shinn, a former US ambassador to Burkina Faso and Ethiopia and a specialist in China-Africa relations, pointed out that the quality of Chinese military equipment has risen and that Beijing is willing to enter markets where the West hesitates.

“Unlike many Western countries, China will sell military equipment to any country so long as it is not under a United Nations sanction,” Shinn said.

Experts speaking to the newspaper stated that high-technology defence systems, previously purchased mainly from the West and accessible to only a few countries on the continent, are now being shipped more frequently to Africa by China.

Katarina Djokic, a researcher with the Arms Transfers Programme at the Stockholm International Peace Research Institute (SIPRI), said affordable pricing, including maintenance costs, plays a critical role in procurement choices.

Djokic noted that countries maintaining good relations with the West also procure weapons from China.

According to SIPRI assessments, shipments to African nations have not yet reached a volume large enough to fundamentally alter China’s overall arms export figures.

SIPRI data for the 2021-2025 period placed China as the world’s fifth-largest supplier, accounting for a 5.6% share of global arms exports.

During this timeframe, China’s largest customer was Pakistan with a 61% share, followed by Serbia at 6.8% and Thailand at 4.7%.

In SIPRI’s records for 2020-2024, Africa accounted for 14% of China’s major arms exports, ranking as its second-largest market behind Asia and Oceania’s 77% share.

Between 2020 and 2024, the Beijing administration carried out arms sales to a total of 44 countries worldwide.

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Pentagon plans covert spy ring for economic war on China, report says

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The US Department of War (Pentagon) is reportedly planning to establish an extensive network of deep-cover agents to wage economic warfare against China and other adversaries of the US.

According to a report by The Washington Post citing six sources familiar with the initiative, the plan has not yet been put into effect. The newspaper reported that the initiative remains at the planning stage. The Pentagon, however, denies that any such initiative exists.

The report said the operatives would pose as entrepreneurs or private sector employees while concealing their ties to the US government. The network’s mission would be to gather economic intelligence and counter China.

The programme is led by Tom Rakusa, who spent 39 years at the CIA. Rakusa serves as a senior adviser to Deputy Secretary of Defence Steve Feinberg.

The proposed spy network is seen as part of a broader policy by the Donald Trump administration to sharpen economic competition with other countries.

The US is already resorting to tariffs, export controls, and investment in strategic sectors, alongside expanding its economic intelligence gathering.

According to The Washington Post, the new initiative demonstrates the Pentagon’s growing influence under the Trump administration. The department is currently seeking a record budget of $1.5 trillion.

Trade war flares up again with Trump’s return to the White House

The trade friction between the US and China flared up again following Donald Trump’s return to the White House. In April 2025, Washington raised tariffs on Chinese goods to as much as 145%, and Beijing retaliated with tariffs of up to 125%.

In May, US Secretary of State Marco Rubio described China as the primary geopolitical challenge facing Washington. Rubio said that to avoid war, the two sides needed to manage their conflict of interests.

In July, Chinese expert Zheng Yongnian did not simply warn that underestimating the US could prove to be a “fatal mistake”; he stated it explicitly.

According to Zheng’s assessment, the US maintains its primacy through the role of the dollar, its military superiority, and its technological advantages.

Even so, the two sides agreed in June to declare a truce and lower tariffs. In autumn 2026, the US and China extended their trade truce until 10 January 2027.

US Treasury Secretary Scott Bessent said the extension would give the parties more time to discuss economic issues.

Trade deals do not eliminate the strategic contradictions between the two countries. Financial Times columnist Rana Foroohar likened the race between the two nations for commercial, technological, and geopolitical influence to the 19th-century “Great Game” between the Russian and British empires.

Foroohar cited China’s standing in shipbuilding and commercial maritime transport, as well as its expanding footprint in overseas ports, among its key advantages.

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Japan plans curbs on short-term home sales to cool urban prices

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Japan’s ruling Liberal Democratic Party (LDP) plans to restrict short-term property trading to rein in surging home prices in major urban centres, particularly Tokyo.

Led by Prime Minister Sanae Takaichi, the party aims to make support for working households a core priority ahead of local elections scheduled for April next year.

The LDP’s research commission on housing and land policy met on Wednesday to discuss the issue.

According to a report by the Nikkei Asia newspaper, Commission Chair and LDP lawmaker Midori Matsushima said at the opening of the meeting: “Prices of newly built condominiums across Tokyo’s 23 wards have doubled over the past decade. We must work on measures ensuring that people who wish to live in these homes can actually afford to buy them.”

Homeownership in the capital has become virtually unattainable for broad segments of the population. According to data from the Real Estate Economic Institute, the average sale price of a newly built condominium in Tokyo’s 23 wards rose %18.5 in fiscal 2025 compared with the previous year, reaching 137.84 million yen (around $872,000).

Meanwhile, statistics from the Ministry of Labour show that the average annual income of a full-time worker in the capital remained at 6.78 million yen in fiscal 2025. This widening gap between incomes and residential property prices is directly shaping political priorities.

During its campaign for the House of Representatives election in February, the LDP pledged to curb speculative transactions across metropolitan Tokyo and other regions. Earlier this month, a party project team focused on policies concerning foreign nationals also submitted a recommendation urging the government to introduce immediate tax measures against rising home prices.

Under current legislation, profits realized from properties sold within five years of acquisition are classified as “short-term capital gains”. These returns face a tax rate approaching %40, including income tax and local inhabitant tax.

Although this rate is twice the approximately %20 levied as “long-term capital gains” tax on properties held for more than five years, several party members argue it remains insufficient to deter speculation. Calls to tighten the framework may be considered as part of the annual tax reform package to be drafted in December alongside the LDP’s coalition partner, the Japan Innovation Party.

The ruling bloc wants to present concrete housing pledges to voters heading to the polls in April across numerous urban centres, including 22 of Tokyo’s wards where local assembly terms expire.

“We need to support families with children, who are typically at the stage of purchasing a home,” a senior LDP official said.

Opposition parties are also preparing alternative proposals that target not only prospective homebuyers, but also residents forced into the rental market by high property prices and now affected by escalating rents.

Tax steps take precedence over limits on foreign buyers

Several countries seeking answers to housing affordability pressures have imposed direct restrictions on foreign purchasers. In South Korea, real estate policies played a major part in the declining public approval ratings of President Lee Jae Myung.

In August 2025, authorities in Seoul introduced an approval requirement for foreign nationals buying homes in the capital and adjacent areas, while also mandating that buyers reside in the properties for at least two years.

Canada and Australia have enacted temporary bans on foreign residential purchases, while Singapore levies a %60 additional stamp duty on foreign buyers.

The role of overseas investors in Japan’s property market also drew debate during the February election. However, restrictions aimed directly at foreign nationals are viewed as potentially conflicting with international trade and services agreements.

Consequently, rather than imposing restrictions based on the nationality of buyers, the government is discussing tax measures aimed at speculative real estate deals, such as rapid resales.

Fears that sharp market measures could shake regional banks

Concerns have also surfaced that aggressive steps to force down prices could harm the wider national economy.

A senior LDP tax official cautioned that a steep drop in land prices could weaken local financial institutions, warning: “We must consider the impact on regional banks.”

The real estate sector accounts for roughly %18 of total lending by Japanese banks. This proportion sits well above the %10 level recorded during Japan’s bubble economy of the mid-to-late 1980s.

At certain regional banks, property lending accounts for nearly half of total loan portfolios.

According to March 2025 data from the Financial Services Agency, approximately one-quarter of all loans extended by regional banks to the real estate sector are concentrated directly in Tokyo’s five central wards.

Buoyant asset valuations, supported in part by rising stock indices, have underpinned strong public approval for the Takaichi administration. Observers note that property interventions designed to cool the market could drag down equity prices and weaken the government’s standing.

A senior official on the LDP research commission stressed that decision-makers must act with caution regarding the scope and timing of any measures intended to bring price increases under control.

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