Heightened Sino-Japanese tensions since late 2025, triggered by Prime Minister Sanae Takaichi’s statements linking a Taiwan contingency to Japan’s potential exercise of collective self-defense, have produced sustained Chinese diplomatic protests, dual-use export controls, and increased coast guard activity near the Senkaku/Diaoyu Islands. Japan has responded with longer-range missile deployments, Southwest Islands infrastructure upgrades, and joint exercises with the United States and partners, alongside occasional Taiwan Strait transits. These steps reflect mutual deterrence signaling and gray-zone coercion rather than kinetic exchanges. No verified armed clashes between Chinese and Japanese forces have occurred, while U.S. alliance commitments and official diplomatic channels continue to constrain escalation. With only months remaining before 2027, the absence of rapid movement toward direct combat underpins trader expectations that a military clash will be avoided.