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Japan's economy reels as tensions over China's Taiwan remarks escalate

Japan's Prime Minister Sanae Takaichi's provocative remarks on China's Taiwan have strained China-Japan relations, triggering economic repercussions. China has condemned her statements as violations of the One China principle and issued travel warnings, leading to sharp declines in Japanese tourism-related stocks, including Shiseido and department stores. Japan's GDP also contracted by 1.8 percent in Q3, amid weakened domestic demand and exports. Takaichi's refusal to retract her comments risks further economic instability, as markets fear prolonged diplomatic tensions. Historically, Japan's political missteps have resulted in significant economic costs, underscoring the risks of escalating tensions with China. The fallout highlights the interconnectedness of diplomacy and economic stability.