A New Year, but Some Old Issues – by Bill Bishop

Last week’s column concluded with the comment that a resolution to the Chinese-Japanese dispute over the Diaoyu/Senkaku Islands seemed far away despite hopeful talk about the possibility of a summit meeting between Xi Jinping of China and Shinzo Abe of Japan.

Statements in recent days by the Japanese prime minister will not bring a solution closer. Mr. Abe told a Japanese legislator that “he would consider permanently basing civil servants” on the islands. In comments that were prominently reported in Chinese media, Mr. Abe also stated in a speech to Japan’s Self-Defense Forces that he “will take the lead to stand up against the present danger and protect the people’s lives and asset, as well as our land, the seas and the air at all costs.” The air may already be under attack, as the smog produced in China is blown eastward to Japan.

Stock markets in Japan and China seem unconcerned about the risk of escalation. The Nikkei 225 has rallied for 12 consecutive weeks, gaining about 25 percent in its best weekly run since 1959. The Shanghai Composite Index is at a nine-month high.