A sharp uptick in tensions has hit Asia after Japanese Prime Minister Sanae Takaichi declared that Tokyo may deploy its Self-Defense Forces if conflict in Taiwan ever threatened Japan’s survival. China swiftly shot back, warning of a “crushing defeat” if Japan intervened, and criticized Tokyo’s remarks as reviving wartime militarism. This war of words has put relations into one of their most precarious states in decades.

Why is Taiwan such a flashpoint? To start, the island sits just 110 kilometers from Japan’s southernmost territories—close enough that any fighting would directly threaten Japan’s security and key sea lanes. China sees Taiwan as a part of its territory and vows to take it back, by force if persuasion fails. Japan, heavily dependent on maritime trade and its US alliance, fears losing strategic access if Beijing seizes control of the so-called First Island Chain.

Japanese rhetoric about direct intervention is not new, but Takaichi’s explicit statement as prime minister has raised the stakes. For China, any foreign involvement in Taiwan is an unacceptable red line, framed as outside manipulation reminiscent of past humiliations. Beijing has increased military sorties around Taiwan and the East China Sea, sending a clear signal it is ready to push back against perceived interference.

Despite hawkish talk, there are limiting factors. China and Japan remain deeply economically intertwined, with billions at stake for both. Pulling the US into an open conflict would risk uncontrollable escalation, something neither Tokyo nor Beijing seems eager to provoke. However, “gray zone” confrontations—such as airspace violations and naval maneuvers—are likely to persist and even intensify.

The hostility is spilling into trade and society. Japanese brands are facing consumer boycotts in China; for its part, Japan is boosting defense spending above 2% of GDP and deepening ties with US and regional partners. Meanwhile, anti-Japanese sentiment is rising among Chinese citizens, and cross-border travel and educational exchanges are deteriorating.

What’s next? Watch for more aggressive Chinese military drills, Japan’s continued preparations for Taiwan-related emergencies, and a hardening of public attitudes on both sides. Whether quiet diplomacy can calm tempers or if the brinkmanship will spill over remains to be seen, but Asia’s stability—and global markets—are at stake.