Sino-Japanese Relations In Danger

If one takes a look into history, the Middle Kingdom and the Land of the Rising Sun never were
friends. For centuries, and at times up until now, neighboring China and Japan have had tense
relationships. On the other side, these countries had — and still have — strong economic
relationships. When Japan became one of the strongest economic powerhouses, Japanese companies
invested heavily in Mainland China, in spite of all the political turmoil.

However, with the well-known global financial crisis starting in 2008, the financial power of
the Japanese economy started to shrink, and investors started to question their own financial
structure. This was also the case for the Japanese textile and textile machinery industry. Only
very few globally present Japanese machinery manufacturers retained a strong market position,
accompanied by the ever-ingenious Japanese man-made fiber industry. However, the automotive
industry still was in very good shape.

Then, new clouds appeared in the Japanese skies: the disaster in Fukushima. And recently,
Japan and China started to fight over some small islands in the East China Sea. These problems
culminated in a refusal by Chinese customers to buy Japanese cars. Now, Japan is in a vicious
circle, and the worst case for Asian people is to lose face. And the Chinese and Japanese are
Asian, so both parties are not — at least, not yet — willing to pull back.

On top of that, Japanese politicians are fighting to find the right solution for these
problems. Meanwhile, the public debt is climbing to new heights: The liabilities by now total
almost 1,000 trillion yen (US$12.48 trillion) or an estimated double the annual economic output. It
seems that in spite all political obstructions, the Bank of Japan will increase the market for
government bonds by another 11 trillion yen (US$137.25 billion) to 91 trillion yen (US$1.14
trillion) to stabilize the situation.

China and Japan are by far the strongest financial powers in the Asia-Pacific Rim. And not
just Asian countries are dependent on healthy economic conditions in these two countries. It would
be highly appreciated by the world community, including the textile machinery sector, if both
parties could sit down at the table and talk to each other.

October/November/December 2012 online issue