Overview
Last year’s political vacuums in Seoul and Tokyo ushered in two leaders who have taken sharply divergent approaches to relations with China. Prime Minister Takaichi’s remarks on Taiwan in November triggered a sharp downturn in China-Japan relations and revived rhetoric centered on Imperial Japan. In contrast, South Korea’s ties with China have warmed under President Lee, whose pragmatic diplomacy has readily positioned Seoul to balance relations with both Washington and Beijing. Together, these dynamics point to a year of careful navigation for regional leaders and businesses alike as they seek to avoid fallout from further escalation.
Downward Turn in China-Japan Relations
President Trump’s return to the White House and reintroduction of protectionist policies quietly fueled speculation about closer regional coordination among East Asia’s major powers. Last year saw the resumption of China-Japan-South Korea trilateral foreign ministers’ dialogue after a five-year hiatus; frequent feuding neighbors Japan and South Korea agreed to revive shuttle diplomacy; and the leaders of China, Japan, and South Korea held bilateral meetings on the sidelines of APEC South Korea 2025—all tentative steps toward rapprochement.
However, that momentum quickly unraveled. Less than a week after meeting President Xi, Prime Minister Takaichi told parliament a Chinese attack on Taiwan could constitute a “survival-threatening situation” for Japan, potentially justifying a military response under Japanese law. Beijing viewed this as a departure from Tokyo’s longstanding posture of strategic ambiguity on Taiwan.
While figures like former Prime Minister Shinzo Abe had warned that a “Taiwan contingency is a Japan contingency,” he stopped short of outlining how Japan would respond in concrete terms. Prime Minister Takaichi’s remarks went further in rhetorical scope, explicitly signaling Japan’s readiness to act, yet remain rooted in the framework shaped by Abe: revitalizing the economy, countering China’s power, and expanding defense capabilities. Under his leadership, Japan reinterpreted its pacifist constitution to permit collective self-defense, broke its long‑standing 1% GDP cap on defense spending, and eased its ban on arms exports. These changes shaped Japan’s current defense trajectory, which Takaichi has continued—most recently with her government in December approving a record $58 billion defense budget for 2026, or 2% of GDP.
Beijing responded swiftly to Prime Minister Takaichi’s remarks with a range of rhetorical, economic, and diplomatic measures targeting Tokyo. Chinese officials have framed Takaichi’s message as “launching a war of aggression against China” and “challenging the historical conclusions of World War II” (WWII). China is evoking historical grievances stemming from Imperial Japan’s invasion of Manchuria and the Second Sino-Japanese War, casting current tensions as a continuation of past Japanese aggression. This narrative aligns with the Chinese Communist Party’s (CCP) broader political messaging campaign in 2025 (the 80th anniversary of the end of WWII), which emphasized China’s wartime resistance and suffering against Japan. On Thursday, China released a report accusing Japan of pursuing “expanding” and “dangerous” ambitions to acquire nuclear weapons, alleging Japan is stockpiling nuclear materials and urging the international community to contain Japan’s nuclear capabilities.
This week, Beijing escalated tensions further by banning exports of dual‑use items for military purposes and launching an anti‑dumping investigation into dichlorosilane imports from Japan, a key semiconductor material. In the weeks following this measure, China has discouraged travel and study in Japan, reinstated restrictions on Japanese seafood imports, and staged a large‑scale military exercise simulating a blockade of Taiwan—a warning to both Japan and the US, which recently approved a record $11.1 billion arms sale to Taiwan.
Upward Trajectory in China-South Korea Relations
Against this backdrop, China-South Korea relations have followed a different path. President Lee has diverged from predecessors, who strained the bilateral relationship, by steering Seoul toward maintaining more balanced ties with Washington and Beijing. His more flexible and pragmatic stance toward China was underscored this week by a successful four‑day visit to China—marking his second leader‑level meeting with President Xi in two months and the first visit by a South Korean leader to Beijing in six years. For Lee, the visit aimed to stabilize bilateral relations, boost trade, lift Beijing’s ban on Korean cultural content, and encourage China to use its influence over Pyongyang to mediate on Korean Peninsula issues.
For President Xi, beyond the broader economic and diplomatic benefits, strengthening ties with South Korea serves a strategic purpose: it creates a visible contrast to the deterioration of China-Japan relations. During his meeting with President Lee, Xi invoked the shared history of Chinese and Korean suffering under Japanese militarism, declaring that the two countries should “join hands to defend the fruits of victory in World War II.” This use of WWII rhetoric reflects China’s strategy of appealing to historical narratives of unity against foreign aggression to advance a vision of a “community of common destiny”—a concept interpreted as Beijing’s challenge to a Western-led international order that China argues privileges Western power. Moreover, it also suggests Beijing sees strategic value in leveraging Seoul’s political clout—as both a major East Asian power and a US ally—to counter narratives it perceives as threatening to its national interests.
The Road Ahead for East Asian Dynamics
The sharp divergence in China’s approach to Japan and South Korea, which began in late 2025, underscores a volatile strategic environment heading into 2026. Beijing’s rapid escalation against Tokyo following Prime Minister Takaichi’s Taiwan remarks has hardened political and economic lines that are unlikely to ease soon. In contrast, positive redirection in Beijing and Seoul’s relationship reflects a calculated effort by both nations to advance common goals while pursuing their individual interests. For regional leaders, this dynamic presents both opportunities and risks.
While Seoul stands to gain economic and diplomatic benefits from closer ties to Beijing, Tokyo faces heightened exposure to punitive trade and regulatory measures if tensions persist. China has remained ambiguous about the scope of its actions against Japan—including which products from its list of about 1,100 dual-use items are affected, whether rare earth exports will be restricted, and whether the measures target all industries or only military-linked firms—creating significant uncertainty for businesses operating in Japan. This unpredictability, combined with Beijing’s demonstrated willingness to leverage strategic sectors in response to diplomatic disputes, suggests that access to China’s market may become increasingly conditional for states perceived as challenging its core national and economic interests. Although Seoul is currently enjoying warmer relations with China, its industries remain vulnerable to geoeconomic shocks stemming from great-power competition between the US and China. This vulnerability was evident in October, when Beijing sanctioned five US subsidiaries of South Korean shipbuilder Hanwha Ocean over their alleged involvement in Washington’s Section 301 investigation into Chinese shipping and shipbuilding. One month later, Beijing suspended the sanctions for a year after a meeting between Presidents Trump and Xi, underscoring how Seoul’s industries remain vulnerable to pressures from both markets.
With US foreign policy under the Trump administration marked by uncertainty and no direct security pact binding Japan and South Korea, the region’s ability to coordinate crisis responses remains limited, leaving East Asia vulnerable to volatility. Meanwhile, multiple regional flashpoints are still active—from North Korean missile tests to heightened military activity in the Taiwan Strait—leaving the risk of escalation to remain elevated.
Moreover, Prime Minister Takaichi’s hardline posture also carries growing economic risks. Another consequence of her November remarks was the decision by roughly 200 business leaders to skip the Japan-China Economic Association meeting scheduled for later this month, marking the first deferral of this annual event in 13 years due to political tensions. There are concerns that similar strains could emerge in Japan-South Korea relations. In December, Takaichi revived historical grievances by asserting Japanese sovereignty over disputed islets with South Korea, just as bilateral ties appeared to stabilize following President Lee’s election. Although Lee largely sidelined the remarks—stating only that Seoul would respond “sternly” without further action—continued rhetorical escalation by Takaichi risks undermining business confidence in Japan and producing wider spillover effects across the region.
