On the horns of a dilemma

Souring diplomatic relations have put Japanese enterprises in a difficult position, but a large-scale withdrawal is unlikely

In 2012, Sino-Japanese relations hit their lowest point since diplomatic relations were resumed in 1972. This was due to former Tokyo governor Shintaro Ishihara's provocative proposal to "purchase" the Diaoyu Islands, then Yoshihiko Noda government's "nationalization" of three of the islands, and then hard-line stance and upgraded military buildup by Shinzo Abe's Cabinet.

In China, Japan's provocations resulted in anti-Japanese demonstrations and the boycotting of Japanese goods, which led to a decline in bilateral political trust, animosity between the two peoples, as well as rising corporate investment risks.