Japanese businesses shut hundreds of stores and plants, while the country's embassy suspended services in China today as anti-Japan protests reignited and risked dragging a territorial dispute between Asia's two biggest economies deeper into crisis.
Two Japanese nationals landed on one of the islands at the centre of the dispute, Japan's coast guard said, raising tensions in an area already patrolled by ships from both nations and increasing fears of direct clashes.
China's worst outbreak of anti-Japan sentiment in decades has led to protests and attacks on Japanese companies such as car makers Toyota and Honda, forcing them to halt operations.
Other well-known Japanese firms - from Mazda and Mitsubishi Motors to Panasonic and Fast Retailing - also shuttered plants and stores in China, sending Japanese share prices falling and prompting a warning from credit rating agency Fitch that the situation could hurt some auto and tech firms' creditworthiness.
Hitachi Construction Machinery recalled 25 Japanese workers back to Japan because of the unrest.
Japanese restaurants, a common target of protesters, barred their doors while many Japanese expatriates stayed inside, afraid that today's anniversary of Japan's 1931 occupation of parts of mainland China could lead to outbreaks of violence.
As demonstrators across the country took to the streets, carrying Chinese flags and portraits of Mao Zedong, Chinese police issued warnings against unruly behaviour, although state-run media struck a more hostile tone, linking the territorial dispute with bitter memories of Japanese occupation.
"Wipe out all Japanese dogs," read one banner held aloft by one of thousands of protesters marching on the Japanese embassy in Beijing, which was ringed by riot police standing six rows deep. In southern Guangzhou, another protester held a banner reading "Japan is a dog of the Americans".
Tensions were also high out at sea, around the disputed group of uninhabited islets at the centre of the row. In the East China Sea, the islands are called the Senkaku by Japan and Diaoyu by China and are near potentially large gas reserves.
Two Japanese nationals briefly landed on one of the islands, having paddled up to it in a rubber raft and swum ashore before returning to the boat, Japanese broadcaster NHK said.
A flotilla of around 1,000 Chinese fishing boats is also reported by Chinese and Japanese media to be heading to the area. Japan said a Chinese fishing patrol boat had broadcast a radio message declaring the waters to be Chinese territory and asking Japanese Coast Guard vessels to leave. It was not clear how many of the Chinese boats had reached the area.
In 2010, a bilateral crisis over the islands erupted after a fishing boat collided with a Japanese Coast Guard vessel. The Japanese government has set up an information-gathering operation to monitor the movements of the Chinese fishing boats.
The long-standing territorial dispute erupted last week when the Japanese government decided to nationalise some of the islands, buying them from a private Japanese owner.
US defence secretary Leon Panetta today repeated a call for China and Japan to exercise restraint in their dispute. "With respect to these current tensions, we are urging calm and restraint by all sides and encourage them to maintain open channels of communication in order to resolve these disputes diplomatically and peacefully," he told reporters in Beijing.
Reuters