Japan-China Tensions Rise Over Dual-Use Export Ban

Japan's government decries China's decision to ban dual-use exports amidst heightened diplomatic tensions. Dual-use items crucial for technologies like drones are at the center of the dispute, exacerbated by remarks from Japan's Prime Minister about Taiwan. Markets react with a downturn, while potential rare earth restrictions loom.

In an escalating diplomatic conflict, Japan on Wednesday condemned China's ban on the export of dual-use items, which serve both civilian and military purposes. These restrictions, affecting goods crucial for technologies like drones, were labeled 'absolutely unacceptable' by Japan's top government spokesperson amidst tensions with China.

The dispute originated when Japanese Prime Minister Sanae Takaichi warned that a Chinese attack on Taiwan could threaten Japan's security—a statement that Beijing found unacceptable. The recent move by China to block these exports appears as a retaliatory measure against Japan's stance.

The impact of China's ban on Japanese industry remains unclear, though market reactions saw Japanese shares decline. Analysts warn that further restrictions, particularly on rare earth exports, could severely affect Japan's economy, especially its automotive sector. Despite current stability in rare earth exports, future constraints could be costly for Japan.

(With inputs from agencies.)