Japanese companies heavily reliant on Chinese consumers and tourists are bracing for potential fallout as diplomatic tensions between China and Japan intensify. The friction stems from recent controversial remarks by Japanese Prime Minister Takaichi Sanae regarding Taiwan, which triggered a series of countermeasures from China, including travel advisories and suspended cultural exchanges.
On November 18, Nikkei Asia reported that sectors such as tourism, retail, and entertainment are expected to bear the brunt of the diplomatic spat. Following China's issuance of study-abroad and travel warnings, Japanese stocks tied to tourism took a hit on November 17. Shares of Isetan Mitsukoshi Holdings plunged 11.31%, while Takashimaya dropped 6.18%. Shiseido, which relies significantly on Chinese tourist spending, fell 9%, and Oriental Land Co., operator of Tokyo Disney Resort, slid 5.68%.
Several Japan-related cultural events in China have also been postponed or canceled, including screenings of the animated films *Crayon Shin-chan* and *Cells at Work!*, as well as a fan meet-and-greet for Japanese boy band JO1.
China has signaled readiness for substantive countermeasures, with state media outlet "Yuyuan Tantian" highlighting preparations for retaliatory actions. On November 14, the Chinese Foreign Ministry advised citizens to avoid travel to Japan, followed by similar warnings from the Ministry of Education and the Ministry of Culture and Tourism.
The Nikkei noted that Japanese airline and retail stocks tumbled on November 17, with the Nikkei 225 index shedding over 1,400 points by midday on November 18, dragged down by tech stocks and worsening bilateral relations.
Data from the Japan National Tourism Organization shows Chinese visitors accounted for 7.49 million arrivals from January to September, a 40% year-on-year increase, making China Japan's largest tourist source market. Chinese tourists also led in spending, contributing 27.7% (¥590.1 billion) of total foreign visitor expenditures in Q3 2025, up 26.1% year-on-year. Shopping constituted over 30% of their expenditures, with luxury goods and cosmetics being top purchases.
Major retailers reported heavy dependence on Chinese shoppers. Takashimaya disclosed that Chinese customers accounted for over 50% of its tax-free sales from March to August, while Matsuya in Ginza cited a 60% share. Both expressed concerns about the uncertain outlook.
Fast Retailing, which operates about 900 Uniqlo stores in China, stated it is closely monitoring developments. Japan Airlines, however, has yet to observe significant booking cancellations on China routes.
In contrast, Chinese travel agencies reported a surge in cancellations for Japan-bound tours, with one Shanghai-based agency seeing over 60% of group bookings canceled.
Economists warn of substantial economic repercussions. Takahiro Nagahama, chief economist at Dai-ichi Life Research Institute, projected annual Chinese tourist spending could exceed ¥2 trillion if current trends hold. Nomura Research Institute estimated the travel advisory might cost Japan ¥2.2 trillion in lost revenue, shaving 0.36% off GDP.
Analysts caution that prolonged tensions could disrupt bilateral trade, particularly in machinery, automobiles, and chemicals, despite Japanese firms' reduced expansion plans in China. China remains a critical export market for these sectors.
At a November 18 press briefing, Chinese Foreign Ministry spokesperson Mao Ning reiterated demands for Japan to retract its "erroneous statements" on Taiwan, stressing that Tokyo's actions have undermined the political foundation of bilateral ties. "China's stance on safeguarding core interests and upholding international justice remains unwavering," she declared.
The escalating row threatens to inflict lasting damage on Japan's economy, with Bloomberg warning of significant losses in tourism and education sectors. Chinese students comprise 36.7% of international enrollments in Japan, while Chinese tourists represent a quarter of annual arrivals—both now at risk due to the diplomatic chill.