People walk at the Sensoji temple in the Asakusa district in Tokyo on December 1, 2025. Photo: VCG

Japanese companies are increasingly worried about the economic fallout from strained relations with China, according to a Reuters poll showed on Thursday. Analysts said that the erroneous remarks and provocative actions by Japanese politicians, including Sanae Takaichi, have aroused uncertainty, and created enormous compliance risks and market losses for companies.

More than two-thirds of Japanese firms expect the economy to suffer from frayed bilateral ties, of which, about 43 percent of respondents said prolonged deterioration in bilateral relations would likely lead to a review of China-related business, the survey showed.

The survey was conducted by Nikkei Research for Reuters from December 24 through January 7. Nikkei Research reached out to 494 companies of which 237 responded on condition of anonymity, Reuters said.

Chen Zilei, Director of the Research Center for Japanese Economics at Shanghai University of International Business and Economics, told the Global Times that the erroneous remarks and provocative actions by Takaichi and some other Japanese politicians have severely disrupted the previously stable course of China-Japan relations. These actions have heightened anxiety among Japanese businesses regarding the economic outlook between the two nations.

"This is exactly why Japan's business sector is alarmed," Chen stated, adding that the politicians' behavior directly undermines corporate interests and shows a disregard for the private sector's well-being.

Nearly half report or anticipate direct business impacts. As showed in the survey, about 9 percent said their business has already been affected by the issue, and 35 percent expect some sort of impact.

Tensions escalated after Takaichi's erroneous remarks related to Taiwan island. China has since advised its citizens against travel to Japan.

"A decline in the number of Chinese travelers is beginning to weigh on the utilization rate and per-room revenue of our hotel business," a manager at a railroad operator wrote in the survey, Reuters reported.

"If Japanese automakers' sales were affected in China, our sales would decline and we would face the possibility of withdrawing from business in China," said a manager at a transportation equipment manufacturer in the survey.

Reuters also cited an official at a chemical firm, who said a protracted diplomatic dispute would prompt the company to reduce China's weighting in sales and procurement.

A Monday report revealed that corporate bankruptcies number in Japan in 2025 reached the highest level since statistics began in 2013.

Tokyo Shoko Research, a credit research firm, on Monday reported that the number of corporate bankruptcies in Japan surpassed 10,000 for the second year in a row in 2025 as smaller businesses were hit hard by soaring labor costs and surging prices, the Japan Times reported on Tuesday.

Bankruptcy cases, involving debts of at least 10 million yen ($62,910), rose 2.9 percent from 2024 to 10,300, the highest level since 2013, with small-scale bankruptcies accounting for 76.6 percent of the cases, the report showed.

By industry, the service sector, including restaurants, saw the highest number of bankruptcies at 3,478 cases, up 4.5 percent, followed by construction at 2,014, up 4.7 percent, and manufacturing at 1,186, up 3.9 percent.

The combined pressures highlight how geopolitical friction is amplifying Japan's economic vulnerabilities, particularly for export-reliant and China-dependent sectors, Chen pointed out.

For example, inbound tourism - once a vital "life-saving injection" for the Japanese economy - is now losing its critical function due to strained China-Japan relations and the sharp drop in Chinese visitors.

For local economies and the retail sector, this represents a massive demand gap, Chen noted.

Global Times