China’s protests will have limited impact on Japanese firms

Anti-Japanese protests in China will likely have a limited short-term impact on Japanese firms that are likely to recover easily from the losses inflicted so far, Moody’s Investors Service said Thursday. “The greatest impact to date has been — as the media has widely reported — a sharp decline in sales of Japanese autos and consumer electronics in China,” Moody’s said. “Moody’s believes that insured and uninsured losses because of the protests are expected to be limited. Most normal insurance contracts exclude coverage of damage due to rioting, but ultimately treatment will be based on what customers and insurers had previously agreed.” Anti-Japanese sentiment has intensified throughout China, following Japan’s announcement last week that it bought three of the disputed islands, known as Senkaku in Japan and Diaoyu in China, from private Japanese owners. Tens of thousands of angry Chinese vandalized a number of Japanese factories and stores in China over the weekend, forcing them to temporarily shut down. A few factories, however, resumed production on Wednesday. The credit appraiser, however, said the longer-term effect of the ongoing event is harder to predict and likely to be of varying degrees. “Over the longer term, the effect of rising anti-Japanese sentiment on the mainland on Japanese businesses is difficult to determine,” said Peggy Furusaka, a senior analyst at Moody’s. “The possible implications — in an extreme and unanticipated scenario — could include the loss of access to a significant and growing market for Japanese manufactured goods, or a reduction in the ability of Japanese manufacturers to locate facilities in China.”