Is Japan’s territory dispute with China prolonging its recession?

<p>Japan’s territorial dispute over islands in the East China Sea could prolong its recession.</p>

After welcoming its new prime minister after a snap election in December, Japan is hoping it will finally hoist itself out of recession – but the nation's ongoing territorial dispute with China over uninhabited islands in the East China Sea could drag out the country's economic contraction.

Bloomberg reports that Japanese car sales are struggling to recover after a boycott instigated by China, which saw the world's number two economy favour vehicles from South Korea instead, while the US has now overtaken China as Japan's biggest automotive export market.

Trade between both powerful Asian countries has tripled since 2000 to more than $300 billion (£186 billion) and therefore there is a lot at stake for Japan, which has been struggling with a stagnating economy for years.

Indeed, the impasse has led to declines in shipments to China from Japan, with Japanese industrial output declining in November by 1.7 per cent to the lowest level since the aftermath of the earthquake and tsunami in 2011.

The Nikkei 225 closed on a strong footing today (January 8th), rising by 0.6 per cent to 10578.5 points.

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