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. Last Updated: 07/27/2016

China-Japan Dispute Clouds Trade

TOKYO -- Japanese officials fretted Tuesday about a plunge in travel to China, as tourists canceled trips in droves, amid growing fears about the economic fallout from the worst diplomatic dispute between Tokyo and Beijing in decades.

Analysts said Japanese companies, many of which are counting on China's booming economy, were not taking the anti-Japan sentiment and unrest seriously enough -- a concern investors appeared to share. The benchmark Nikkei Stock Average plunged 3.8 percent Monday to end at its lowest point since Dec. 16, although share prices rebounded Tuesday on bargain-hunting.

"Some damage to tourism cannot be avoided," Transportation Minister Kazuo Kitagawa said at a news conference. "Both sides should make efforts to resolve the current situation."

Major Japanese airlines have been deluged with cancellations. Japan Airlines said 5,500 travelers booked for travel to China in April and May had canceled so far, spokesman Kenichi Ando said. All Nippon Airways said 12,000 passengers, or 10 percent of travelers in April from Japan to China, were expected to cancel.

On Saturday, Chinese police stood by as thousands of rioters threw stones, eggs and plastic bottles at the Japanese Consulate in Shanghai, and damaged Japanese restaurants and cars. It was the third consecutive weekend of protests.

The Chinese are angry about several issues: a new Japanese textbook that critics say glosses over World War II atrocities; Japan's bid to win a permanent seat in the UN Security Council, and the Japanese prime minister's visits to a shrine that honors war criminals.

"Japanese businesses are clueless about the situation, and that makes it even more dangerous," said Susumu Yabuki, honorary professor of China studies at Yokohama City University.

Before, the common wisdom about China-Japan relations was that political tensions would not spread to business. Last year, China surpassed the United States as Japan's biggest trade partner.

Now the anger is so volatile, political concerns could take precedence over economics, Yabuki said.

On Monday, Japanese and Chinese officials blamed each other for the situation and demanded apologies.

Japanese companies have been generally mum, brushing off fears about long-term damage to their business.

"It's business as usual," said Koichi Mabuchi, spokesman for Isuzu Motors.

Other Japanese automakers, including Toyota, Nissan and Mazda also said they still planned to take part in the Shanghai auto show this week. Honda president Takeo Fukui, however, said earlier this month his automaker was cutting back business trips to China so its workers could keep a low profile.

In recent weeks, Asahi Breweries beer has been removed from some store shelves in China, although the company said it was too early to assess overall damage to sales.

Chinese families have passed down bitter wartime memories, said Hikotaro Ando, honorary professor at Waseda University in Tokyo. "The Chinese have not forgotten, and more Japanese have to recognize this fact," he said.