Image: AP Photo/Kin Cheung

Image: AP Photo/Kin Cheung

A major conflict between the region’s two largest economies would not only impose a harsh dilemma on U.S. diplomats, but also have a significant impact on the entire global economy. It is in every nation’s best interest that the Chinese and Japanese settle their territorial dispute over the Senkaku Islands peacefully.

Full MUST WATCH 5 minute war-game scenario & economic impact analysis of a war between Japan & China is below:



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  1. Obstuse American politicians are going to end up getting us all killed yet.. their rabble rousing to china about currency manipulation, and standing behind the increasingly irrelevant and historically closed and racist nation of japan is asking for trouble.

  2. Meanwhile, Russia and Japan are still quarreling over a couple of islands.  The two countries never signed a peace treaty after WWII and are technically, still at war.  Having said that – Japan has much more to frar from the Tiger than it does from the Bear.
    This smells a lot like the Falkland Islands dispute back in the early 1980’s, although that little spat was not nearly the threat to the global economy a Japan – china war would be.
    Funny how history rhymes, isn’t it?

  3. There was a post a week or so ago that outlined the possibility that China and Japan will ally themselves without coming to blows over the islands.  These two nations are closer than most might think.  Japan’s industrial base has roots in its culture. If they saw their industrial base crushed due to a war and no backup from the US, they would likely side with China to avoid extreme damage. 
    Even with the Yen devaluation, the trade deficit last month was more negative that anticipated.  If this continues,  Japan will have the unenviable situation of having devalued the yen by 20% and still not corrected their trade balances.  Not that the trade balance is unfixable but as the world wide GDP slowly grinds down, this country may be  in the worst of two worlds.  Unremedied trade deficiencies and imported inflation due to currency devaluation.  If oil continues up in price, this would be the third leg of a situation that will hurt Japan for many months or years into the future
    Working through the inland’s future and the petroleum reserves thought to be under the ocean might give China and Japan reason to work together on other things important to Japan like trade, gold, oil and a new gold backed currency. Figuring  that the alliance with China is better in the long run as America’s place is eroding, partly due to China’s efforts, Abe is not stupid.  He wants to get Japan back on track with exports and retain the industrial base.  Maybe this Co-Prospertiy Sphere would be less damaging than the last one. I have little confidence that the idiot in White House will be able to do anything other than offer some tired solutions that have no bearing on the problems at hand, except maybe to blame Bush and a few billionaires for these issues.

    • What I would like to know is what the Japanese think of the Icelandic solution to resolving debt issues.  Clearly, Japan is in WAY above their heads and with very few viable options remaining.  They are trying currency devaluation and money printing but if that process worked, Zimbabwe would be a world financial super power instead of a 3rd… er, 4th world… s***hole.

    • @ AGXIIK
      Someone should tell Japan and China the way for a peaceful resolution of the territorial conflict.
      Someone has to speak to the UN and to put into circulation a new status: the “disputed territories.” Japan and China do not need to fight over disputed oil and gas. Only need to be partners in this business for 50/50%.
      It is more profitable for each of them.

  4. Damn I’ll never get that 5 minutes back.  Very amaturish and onesidedly myopic.  
    The bottom line is, the people currently in charge of the USSA will ONLY think about or do what is in their own interests. The US gov’t, whoever they are, do NOT care about the Chinese or the Japanese people or their respective economies beyond how it will slow the  dwindling US hegemeny enjoyed at the end of a gun by the illusion of a superior US military.  The US acts unilaterally when it needs to…..creates or destroys enemies,allies and coalitions when it needs to…drops nukes or interns entire populations of their own citizens when they need to.
    History repeats.  Only this time, it will be different. In the end, The USSA will stand alone. Well, I guess Canada will get sucked along or sucked up in whatever they do, but all we got is oil, uranium and a common border.

  5. Agreed Silvermail. China and Japan should put aside their differences.  Abe is a jingoistic aggressive sort, which does not lend itself to peaceful discussion. But China is far larger and stronger than Japan.  Diplomatic solutions and sharing of resources would be the wisest course.  Japan would benefit more than China since they are desperate for oil right now.  Nuclear is not going so well for them

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