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The current between China and Japan over the long-standing surrounding ownership of five uninhabited islands in the East China Sea could over into a damaging economic conflict. The island group is called the Senkaku by the Japanese and as Diaoyu by the Chinese. They are also by Taiwan. Some analysts say the situation could even spiral of control and lead to war between the two economic powerhouses. Tensions have reached point after the Japanese government purchased three of the islands from their private owner this month. This has violent protests in over one hundred cities across China. Hundreds of Japanese factories and shops have been damaged.

The economic over the disputed islands has already begun. It could affect the US$345 billion in trade between the two countries. Many Japanese companies, such as Panasonic, Toyota and Sony, have production and shut their factories. Japan’s tourism industry, already after last year’s earthquake and tsunami, has taken a as thousands of Chinese have cancelled trips to Japan. Chinese economists are suggesting a of retaliatory measures that could significant damage on Japan’s faltering economic recovery. Among these are economic sanctions, a of Japanese goods and cutting off the supply of “rare-earth” metals by Japan’s tech industries.