With bilateral trade booming, why are Japan-China tensions rising?

Japan and China are pouring billions into reducing their reliance on each other even as their massive trade ties keep them bound together, a hedging dilemma faced by other countries as well. | REUTERS

Oct 11, 2026

By the traditional laws of international relations, the Indo-Pacific should be basking in an era of unprecedented peace. For decades, the prevailing wisdom in Western capitals and corporate boardrooms was rooted in a simple, liberal economic theory that deep economic interdependence reduces the likelihood of conflict. Nations that trade together, the logic went, do not go to war together.

Yet a look at the current geopolitical landscape of the Indo-Pacific reveals a glaring empirical anomaly. In 2024, the total bilateral trade volume between Japan and China reached a staggering $308.3 billion. By all conventional metrics, their economies are deeply intertwined, bound by a complex web of manufacturing linkages, technological supply chains and financial flows. But behind this facade of commerce, a different reality is unfolding. Both Tokyo and Beijing are quietly, yet aggressively, spending billions of dollars to reduce their dependence on each other.

Welcome to the era of “weaponized interdependence.” In today’s Indo-Pacific, the very economic ties that were once celebrated as the bedrock of regional stability are now viewed through the dark lens of strategic vulnerability. As the overarching systemic pressure of U.S.-China competition intensifies, both Japan and China are engaging in a high-stakes game of economic statecraft, desperately seeking strategic autonomy while remaining tethered to each other’s markets out of necessity. It is a paradox that is reshaping the global economic order.

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