**Heightened but contained Sino-Japanese tensions since late 2025 have produced a diplomatic and economic standoff without crossing into direct military confrontation, supporting trader consensus that a clash before 2027 remains unlikely.** Japanese Prime Minister Sanae Takaichi’s November 2025 Diet remarks—that a Taiwan contingency could constitute a “survival-threatening situation” justifying collective self-defense—triggered Beijing’s sharp response, including export controls on dual-use items, sanctions on Japanese firms, tourism restrictions, and stepped-up coast guard and air activity near the Senkaku/Diaoyu Islands and Miyako Strait. Subsequent incidents, such as Chinese carrier operations, bomber transits with Russia, radar-locking episodes, and Japanese missile deployments on southwestern islands, have sustained friction through mid-2026, alongside mutual accusations of “neo-militarism” and embassy incidents. Both capitals have prioritized signaling and economic leverage over kinetic escalation, consistent with longstanding patterns of managing East China Sea disputes through patrols, protests, and deterrence rather than combat. Japan’s accelerated defense spending, Southwest Islands buildup, and coordination with the United States and other partners have reinforced deterrence without provoking open conflict in the narrow window remaining before 2027. While scheduled exercises, patrols, and political rhetoric could produce further incidents, the absence of recent escalatory breakthroughs or direct engagements underpins the strong market pricing against an actual clash.