Within days of China urging its citizens not to travel to Japan due to a diplomatic dispute, Tokyo-based tour operator East Japan International Travel Service had lost 80% of its bookings for the remainder of the year.

Tension between Japan and China has escalated over the new Japanese leader's suggestion Tokyo could intervene militarily if Beijing attacks Taiwan.

China’s benchmark bond yield is poised to fall below Japan’s, a historic crossover that may reignite fears the world’s No. 2 economy is sliding into the deflationary spiral that paralyzed its neighbor in the 1990s.

Less than a month into her term, Japan's conservative leader has stirred tensions with China by suggesting a Chinese move against Taiwan could prompt a Japanese military response.

China has intensified its economic pressure on Japan, with state-owned enterprises banning employees from travelling to its Asian neighbour, tour groups and a flagship forum being cancelled and Japanese film releases suspended.

Japan has warned its citizens in China to step up safety precautions and avoid crowded places amid a deepening dispute between Asia's two largest economies over Japanese Prime Minister Sanae Takaichi's comments on Taiwan.

From China’s point of view, the Japanese Prime Minister’s remarks on Taiwan test a red line - a trigger that sets this dispute apart from past flare-ups, analysts say.

China’s consul general Xue Jian in Osaka was the first to respond, reposting a news article about Ms Takaichi’s comments on social media with the caption, “cut off a dirty neck without a moment of hesitation”, which many understood as a threat to the Japanese prime minister.