Japanese shops, factories close in China after violence
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Japanese Prime Minister Yoshihiko Noda, who met visiting U.S. Defense Secretary Leon Panetta on Monday, urged Beijing to ensure Japan's people and property were protected.
Panetta said the United States would stand by its security treaty obligations to Japan but not take sides in the row, and urged calm and restraint on both sides.
"It is in everybody's interest ... for Japan and China to maintain good relations and to find a way to avoid further escalation," he told reporters In Tokyo.
The overseas edition of the People's Daily, the main newspaper of the Chinese Communist Party, warned that Beijing could resort to economic retaliation if the dispute festers.
"How could it be that Japan wants another lost decade, and could even be prepared to go back by two decades?" asked a front-page editorial. China "has always been extremely cautious about playing the economic card", it said.
"But in struggles concerning territorial sovereignty, if Japan continues its provocations, then China will take up the battle."
Japanese Foreign Minister Koichiro Gemba said on Monday, after talks with Panetta, that Tokyo and Washington agreed the disputed islets were covered by the Japan-U.S. security treaty.
"I did not bring up the topic today, but it is mutually understood between Japan and the United States that (the islands) are covered by the treaty," he said after meeting U.S. Defense Secretary Leon Panetta in Tokyo.
ECONOMIC BLOW
Japanese electronics firm Canon Inc will stop production at three of its four Chinese factories on Monday and Tuesday, citing concerns over employee safety, Japanese media reports said, while All Nippon Airways Co reported a rise in cancellations on Japan-bound flights from China.
The dispute also hit the shares of Hong Kong-listed Japanese retailers on Monday, with department store operator Aeon Stores (Hong Kong) Co Ltd falling to a seven-month low.
"All Japan-related shares are under selling pressure," said Andrew To, a research director from Emperor Capital.
China is Japan's biggest trade partner and Japan is China's third largest. Any harm to business and investment ties would be bad for both economies at a time when China faces a slowdown.
Qingdao police said they had arrested a number of people suspected of "disrupting social order" during the protests, apparently referring to the attacks on Japanese-operated factories and shops there.
In Shanghai, home to China's biggest Japanese expatriate population of 56,000, one expat said his family as well as other Japanese customers had been chased out of a Japanese restaurant on Sunday by protesters near the Japanese consulate.
Guangzhou police said on their official microblog that they had detained 11 people for smashing up a Japanese-brand car, shop windows and billboards on Sunday.
