"The value of goods which may be affected by China's tariffs could be much bigger than the value of goods Japan's tariff is applied to," said Japan's Finance Minister Masajuro Shiokawa. He called for calm between the two sides.
It's not China's first retaliation over farm trade curbs.
Earlier this year, Korea curbed imports of Chinese garlic, claiming local farmers were being hurt. China retaliated by banning imports of Korean mobile phones and plastics raw materials. The Korean government was forced to ask mobile phone and chemicals makers to buy garlic from China to end the dispute.
The dispute may get worse before it gets better.
With wage growth at a record low and unemployment near a record high, Japanese consumers have developed an appetite for inexpensive Chinese goods. That helped widen Japan's trade deficit with China 20 percent last year to ?2.67 trillion (US$22 billion), according to Japanese government figures.
China-made goods now make up about 15 percent of Japan's total imports, up from 6 percent a decade ago. Imports of China-made goods from electronic parts to T-shirts may grow 15 percent a year over the next 10 years to an annual US$200 billion, according to Morgan Stanley Dean Witter & Co.
The swelling deficit doesn't sit well with some Japanese businesses, who say cut-rate imports from China put their goods at a disadvantage. Japanese makers of towels, neckties, clothes and bicycles have asked the government in recent months to limit imports of those goods from China.
Such protection may only be blocking changes in the relationship that may benefit both nations. While China's cheap labor pool can help Japanese manufacturers cut costs, Japan makes high-end components for electronics, machinery and cars that Chinese manufacturers need.
Andy Xie, a regional economist at Morgan Stanley, sees the two becoming each other's largest export markets within 10 years, overtaking the US.
"What we have here is the most convincing case of how bilateral relations can benefit each other," said Xie. "But it could take a crisis before both nations realize how powerful their common interests are."
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