Japanese firms including Panasonic suspended operations at plants in China, companies and reports said on Monday, after mass anti-Tokyo protests at the weekend over disputed islands in the East China Sea.
Speaking in Tokyo, US Defense Secretary Leon Panetta called for diplomatic efforts to resolve the worsening spat, a day after warning “misjudgement on one side or the other could result in violence, and could result in conflict.”
China is Japan's biggest trading partner and the stoppages came as the ruling Communist Party's mouthpiece warned Japan's economy could suffer for up to 20 years if Beijing chose to impose sanctions over the territorial row.
Trade sanctions between Asia's two biggest economies could cast a pall over growth on the continent, which major Western countries are counting on to drive recovery from the global slowdown.
Panasonic said it was halting work at a factory in Qingdao in northeast China “for the time being” after a fire. The electronics giant had also reportedly temporarily suspended two other plants, but no immediate confirmation was available.
The camera and printer maker Canon, meanwhile, suspended three of its four main plants on Monday and Tuesday to ensure the safety of its employees, a company spokesman told Dow Jones newswires.
Widespread anti-Japanese protests, some of them violent, have been held in recent days over a group of small islands known as Diaoyu in China and Senkaku in Japan. They are claimed by both but controlled by Tokyo.
The row intensified last week when the Japanese government bought three of the islands, effectively nationalising them, and China responded by sending patrol ships into the waters around them.
China and Japan have close trade and business ties, with numerous Japanese companies investing in its larger neighbour and two-way trade totalling $342.9 billion last year, according to Chinese figures.
But the two countries' political relationship is often tense due to the territorial dispute and Chinese resentment over past conflicts and atrocities.