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.

Beijing is flexing its military and economic might to show its displeasure with the Japanese leader’s comments about defending Taiwan. But its aggressive approach risks backfiring.

China and Japan have repeatedly faced off around the Japan-administered islands, which Beijing calls Diaoyu and Tokyo calls the Senkaku.

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.