Japan said yesterday it has begun processing applications to let Japanese companies drill for natural gas in a disputed area of the East China Sea, a decision likely to further inflame Tokyo's worst diplomatic row with China in decades.
The flare-up -- which began last week as part of a long-standing feud over Japan's wartime atrocities -- risks jeopardizing Tokyo's bid for a permanent seat on the UN Security Council and blocking the countries' flourishing trade and investment ties.
Japan's Ministry of Economy, Trade and Industry said it will approve corporate bids "as quickly as possible" for deep-sea gas exploration in waters just east of what Tokyo says is its sea border with China. Beijing disputes that border.
A ministry official said approval was expected within two to three months.
China's Foreign Ministry had no immediate comment. The two countries' foreign ministers were scheduled to hold two-day talks in Beijing starting Sunday.
Tensions have escalated since last week, when Tokyo approved new Japanese history textbooks that critics say play down Japan's wartime atrocities.
That triggered anti-Japan protests on Saturday in China's capital, where an angry mob hurled rocks and bottles at the Japanese Embassy, smashing windows.
The rift reflects a fierce rivalry between Japan and China over regional dominance and potentially rich energy sources needed to power their massive economies.
Experts said relations between the two nations had sunk to their worst in three decades.
"They haven't had a falling out like this since establishing diplomatic ties in 1972," Tokuji Kasahara, a professor at Tsuru University, west of Tokyo, and an expert on Japan-China relations.
Tokyo repeatedly has accused China of exploring the oil fields in Japan's exclusive economic zone, demanding that Beijing halt the activities or share the results. Last week, Trade Minister Shoichi Nakagawa said Tokyo would go ahead with plans to let Japanese companies begin test-drilling in early April.
Prime Minister Junichiro Koizumi denied that Tokyo's decision was prompted by China's handling of the protests or Beijing's refusal to apologize.
"It's only a procedure. We will handle it in an orderly manner," Koizumi said.
History has affected Japan's relations with its neighbors for decades.
China, South Korea and other Asian nations have long accused Japan of failing to express adequate contrition for its conquests of the 1930s and 1940s, during which China says as many as 30 million of its people died. The suspicions have only deepened with Koizumi's annual visits to a Tokyo shrine honoring Japan's war dead -- including convicted World War II criminals -- and Tokyo's push for a higher profile on the global stage with a dispatch of peacekeeping troops to Afghanistan and Iraq.
The economic and political repercussions of Tokyo's dispute with Beijing are huge.
China is Japan's second-biggest trading partner, behind the US, with two-way shipments totaling US$170 billion last year. Political discord could hurt Japanese companies' chances of winning infrastructure projects in China, possibly disrupt shipments from those companies' China-based plants and spark boycotts of Japanese goods by Chinese consumers.
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