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China, Japan in escalating dispute over Taiwan

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Japan says travel warning incompatible with beneficial

ties

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Taiwan president says China should exercise restraint

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Shares of Japanese tourism, retail companies hit

(Updates headline and paragraphs 1, 15 and 29 to change "row"

to "dispute")

By Tim Kelly and Liz Lee

TOKYO/BEIJING, Nov 17 (Reuters) - Japan moved on Monday

to tamp down an escalating dispute with China over Taiwan that

has prompted Beijing to urge citizens to halt travel to its East

Asian neighbour.

The dispute erupted after Prime Minister Sanae Takaichi told

Japanese lawmakers this month that a Chinese attack on Taiwan

threatening Japan's survival could trigger a military response.

Her comments broke with past administrations' avoidance of

public discussion of such a scenario, so as not to provoke

Beijing, which claims the self-ruled island.

Masaaki Kanai, the Japanese foreign ministry official in

charge of Asia and Oceania affairs, arrived in the Chinese

capital to meet his counterpart, Liu Jinsong, a video broadcast

by the Kyodo news agency showed on Monday.

Kanai is expected to explain that Japan's security policy

has not changed, and urge China to refrain from actions that

damage ties, media said.

Taiwan is located just about 110 km (68 miles) from Japan's

westernmost island of Yonaguni, near sea lanes on which Tokyo

relies for energy shipments. Japan also hosts the largest

concentration of U.S. military power outside the United States.

"Various channels of communication are open," Japan's Chief

Cabinet Secretary told a regular press briefing, when asked

about Kanai's visit.

"We have made a firm request for the Chinese side to take

appropriate steps," he said, adding that the travel warning was

incompatible with efforts to promote strategic, mutually

beneficial ties.

China's Premier Li Qiang has no plans to meet Takaichi on

the sidelines of this week's G20 summit in South Africa,

however, the foreign ministry said in Beijing.

Instead, Japan should retract its "wrongful" remarks,

ministry spokesperson Mao Ning told a regular news briefing.

Taiwan President Lai Ching-te said China was carrying out a

"multifaceted attack" on Japan, speaking to reporters in the

capital's sister city of New Taipei.

"I call on the international community to continue paying

close attention and I also urge China to exercise restraint and

demonstrate the conduct befitting a major power, rather than

becoming a troublemaker for regional peace and stability," he

added.

Tension could persist for months, however, said Kenji

Minemura, a senior research fellow at the Canon Institute for

Global Studies.

"China knows that Takaichi can't retract her comment, so its

call for one isn't to get a resolution, but to ramp up pressure

on Japan," he said.

LEISURE, RETAIL TAKE A HIT

The dispute flared with Takaichi's comment on November 7, a

week after she met Chinese President Xi Jinping and agreed to

pursue stable ties.

A day later, in a now-deleted post on X, China's consul

general in Osaka, Xue Jian, said "the dirty neck that sticks

itself in must be cut off".

Japan summoned China's ambassador to protest his "extremely

inappropriate" statement and several Japanese politicians called

for Xue's expulsion.

The rift widened on Thursday, when China summoned Japan's

ambassador, for the first time in more than two years, to make a

"strong protest" over Takaichi's remarks.

On Friday, China said Japan would face a "crushing" military

defeat if it intervened over Taiwan and voiced "serious

concerns" about Japan's security direction.

This included ambiguity over its three non-nuclear

principles not to develop, possess or host nuclear weapons.

In August, a Reuters investigation had found growing

willingness in Japan to ease those pledges, long a taboo in the

only nation to suffer atomic bombings.

On Sunday, Chinese coast guard ships sailed through waters

around a group of East China Sea islands controlled by Japan but

claimed by China.

Known as the Senkaku in Tokyo and the Diaoyu in Beijing,

they have been a flashpoint since Japan nationalised them in

2012. Japan's coast guard said it drove the Chinese ships away.

Japan said it also scrambled fighter jets on Saturday, after

China flew a drone between Taiwan and Yonaguni.

George Glass, the U.S. ambassador to Japan, has also waded

into the dispute, criticising Xue on X.

On Saturday, he said it was time to move on, adding,

"Halloween has been and gone," after the Chinese diplomat

labelled Takaichi an "evil witch".

Chinese state-linked media also targeted Takaichi on Monday.

In an editorial, the People's Daily of the ruling Communist

Party said, "Takaichi's dangerous remarks, which have touched

the nerves of all parties, were not only strategic recklessness,

but also deliberate provocation."

If the dispute drags on, a drop in Chinese visitors, such as

the fall of roughly 25% seen during an island dispute in 2012,

could deliver a significant economic hit for Japan, said

Takahide Kiuchi, executive economist at Nomura Research

Institute.

"A drop in visitor numbers on this scale would have a

dampening effect exceeding half of Japan's annual growth," he

said.

Worries about such a hit caused a dip in tourism-sensitive

shares in Tokyo, with department store operator Isetan

Mitsukoshi ( IMHDF ) falling 11.3%, while Japan Airlines ( JPNRF ) gave up 3.7%.