Military Risk, Diplomatic Retaliation, and the Emerging Structural Rift
Geopolitical Risk Intelligence Report / December 2025
1. Executive Summary
This week, Japan–China relations deteriorated sharply across military, diplomatic, and societal dimensions.
The most serious escalation occurred when Chinese fighter jets directed fire-control radar at Japanese Air Self-Defense Force (ASDF) aircraft over the East China Sea—an act representing one of the most dangerous military encounters between the two countries in recent years.
This was compounded by China’s cancellation of Japan-related cultural events and increasing rhetorical and political pressure following recent statements by the Japanese Prime Minister referring to Taiwan contingencies as potential “situations threatening Japan’s survival.”
Taken together, these developments suggest that Japan–China tensions are evolving into a multi-layered, structural confrontation—with implications for regional stability, global supply chains, and risk assessment for governments and international financial institutions.
2. Recent Escalation Events
2.1 Chinese Fighter Jets Lock Fire-Control Radar on ASDF Aircraft
- On December 6, a Chinese J-15 fighter jet twice locked fire-control radar on a Japanese F-15 operating in international airspace southeast of Okinawa.
- Japan condemned the act as “extremely dangerous and unacceptable.”
- China responded by accusing Japan of “interfering with PLA exercises” and framed the incident as “Japan’s provocation.”
Assessment:
This incident represents a significant step toward kinetic miscalculation risk. Fire-control radar lock-on is widely considered a precursor to engagement and is among the most escalatory actions short of firing weapons.
2.2 China Cancels Japanese Cultural and People-to-People Exchanges
- China abruptly halted several Japan-related cultural events, including concerts and exchange programmes in major cities.
- Chinese media framed these cancellations as a reaction to “anti-China rhetoric” from Japanese political leaders.
Assessment:
This demonstrates political tension spilling into social and cultural domains, with the potential to evolve into soft sanctions or informal economic pressure—seen in earlier China–Korea and China–Australia tensions.
2.3 The Taiwan Question as the Source of Diplomatic Deterioration
Japan’s renewed strategic language on Taiwan—specifically the statement that Taiwan contingencies could constitute a “survival-threatening situation”—prompted:
- Harsh criticism from Chinese state media accusing Japan of “reviving militarism.”
- Heightened military posturing by China in East Asian waters.
- A cycle of reciprocal diplomatic protests.
Assessment:
The Taiwan issue is no longer a peripheral irritant; it has become the core structural driver of Japan–China tensions.
3. Broader Geopolitical Context
3.1 China’s Regional Military Posture
Recent intelligence reports indicate that China has:
- Massed naval vessels across multiple maritime theatres,
- Increased activity around the first island chain,
- Conducted joint missile-defense exercises with Russia.
These moves reinforce perceptions of Sino-Russian military coordination and a more assertive PLA posture toward Japan.
3.2 Japan’s Strategic Reorientation
Japan is rapidly expanding its defense capabilities, including:
- Counterstrike capabilities,
- Strengthened US–Japan operational integration,
- New NATO–Japan dialogues.
For China, these developments feed a narrative that Japan seeks to contain China, raising the likelihood of future confrontations.
4. Risk Assessment
4.1 Military and Security Risks
| Risk | Likelihood | Impact | Notes |
|---|---|---|---|
| Accidental military clash | Medium–High | Very High | Radar lock-on incidents increase misfire risk. |
| Airspace / maritime incident escalation | Medium | High | Both militaries operate at increasingly close distances. |
| Emergency diplomatic freezes | High | Medium | China may escalate economic or administrative measures. |
4.2 Economic and Supply Chain Risks
- China may discreetly slow customs clearance for Japan-linked goods.
- Japanese firms in China could face rising compliance inspections or “informal pressure.”
- Tourism and people-to-people flows may decline further.
These effects may not be formally announced—China often uses non-tariff barriers as political tools.
4.3 Societal and Reputational Risks
- Anti-Japanese sentiment could intensify within Chinese media ecosystems.
- The suspension of cultural exchanges undermines long-term mutual trust.
- Japanese expatriates and businesses may face higher operational uncertainty.
5. Strategic Implications for International Financial Institutions (e.g., JBIC)
5.1 Heightened Geopolitical Premium on Japan–China Exposure
Projects with Chinese regulatory involvement or assets located in sensitive regions (e.g., coastal provinces, logistics hubs) require enhanced political risk monitoring.
5.2 Necessity for Scenario-Based Stress Testing
Scenarios should include:
- Partial or full suspension of bilateral economic exchanges
- Supply-chain disruptions involving advanced electronics, rare earths, or automotive components
- Sharp deterioration in maritime security affecting shipping insurance costs
5.3 Opportunities in Diversification & Resilience Projects
Rising Japan–China tensions will accelerate demand for:
- Supply-chain relocation to Southeast Asia, India, and domestic Japan
- Energy security investments
- Cybersecurity and critical infrastructure resilience
JBIC is well-positioned to support such strategic diversification.
6. Conclusion
The events of this week indicate that Japan–China tensions have entered a new, multi-dimensional phase involving:
- direct military confrontation risks,
- retaliatory cultural and social measures,
- deepening strategic distrust driven by the Taiwan issue.
This is not a temporary fluctuation but a structural geopolitical rift that will shape East Asian stability and economic flows in 2026 and beyond.
For Japan, China, and the broader region—including international finance—geopolitical risk must now be treated as a persistent, central factor, not a cyclical one.
