There was a moment during this spring’s US-China summit that didn’t make many headlines.
According to the Financial Times, Xi Jinping’s demeanor shifted noticeably the moment Japan came up in conversation. Not Taiwan. Not trade. Japan. People in the room described it as the most tense moment of the entire meeting.
That’s worth sitting with for a second. China and the US have a long list of things to argue about. Why does Japan trigger something different?
The answer goes back further than most people expect.
A wound that never fully healed
In 1894, China fought Japan in a war that lasted less than a year. China lost — badly. The result was the Treaty of Shimonoseki, which forced China to hand over Taiwan to Japan. For the Chinese Communist Party, this moment marks the beginning of what it calls the “Century of Humiliation” — a period of foreign domination that the Party has spent decades framing as a national scar.
The Century of Humiliation refers to the period from roughly 1839 to 1949, during which China was weakened by foreign powers through wars, unequal treaties, and territorial losses.
Taiwan, in that framing, wasn’t just lost in a war. It was the opening wound of a century of humiliation. So when Xi looks at Japan today, he isn’t just seeing a neighboring country. He’s seeing the country that started all of it.
Japan isn’t just a memory anymore
Here’s where it gets more complicated. Japan has spent the past few years quietly rebuilding its military in ways that would have been unthinkable a decade ago.
Defense spending, which Japan kept capped at 1% of GDP for decades as part of its post-World War II identity, has been rising. A new unified military command was established in 2025 — the first time Japan has consolidated its military operations since the war. The country is procuring long-range missiles capable of hitting targets over 1,000 kilometers away, including American-made Tomahawks with a range of 1,600 kilometers.
A Tomahawk is a long-range cruise missile. At 1,600 kilometers range, a Japan-based Tomahawk could theoretically reach targets deep inside China.
None of this is happening in secret. Japan says it’s responding to China’s military buildup, North Korea’s nuclear program, and Russia’s invasion of Ukraine. The logic isn’t hard to follow: the security environment changed, so Japan changed with it.
China watches all of this very closely.
The geography problem
Look at a map of East Asia, and you’ll notice something. Japan’s islands — stretching from Hokkaido in the north down through the Ryukyu chain toward Taiwan — form a long arc just off China’s eastern coast.
For China’s navy, this arc is a problem. To get from Chinese ports to the open Pacific Ocean, ships have to pass through gaps in that island chain. Japan sits at the gates.
This island chain is sometimes called the “First Island Chain” — a strategic concept describing the line of islands running from Japan through Taiwan and the Philippines that, militarily, can be used to limit China’s naval access to the Pacific.
China has been steadily working to extend its naval reach beyond this chain. Japan’s rearmament makes that harder. And Taiwan — which 76% of Taiwanese people consider Japan their most trusted neighbor — sits right in the middle of it.
From Beijing’s perspective, Japan and Taiwan aren’t two separate problems. They’re the same problem, from two directions.
History doesn’t repeat, but it rhymes
There’s a historical parallel worth noting. Around 1900, Britain and the United States quietly supported Japan as a way to check Russian expansion in Asia. Japan fought Russia in 1904 — and won. The great powers of the time used Japan as a proxy to reshape the regional order without fighting directly.
Today, the United States is rebuilding something structurally similar. Deeper US-Japan military coordination, joint weapons development, Japanese destroyers now transiting the Taiwan Strait. Last year, a Japanese naval vessel passed through the strait on the anniversary of the Treaty of Shimonoseki — the same treaty that cost China Taiwan in 1895.
Whether that timing was deliberate or coincidental, Beijing noticed.
Why this matters for markets
This isn’t just a history lesson. Japan’s rearmament is real money — defense budgets rising, weapons procurement accelerating, and a domestic defense industry that had been dormant for decades starting to wake up.
The deeper tension between China and Japan also means the Taiwan situation isn’t going to quietly resolve itself. Two of the world’s most important semiconductor supply chains — TSMC in Taiwan, Samsung and SK Hynix in Korea — sit in the middle of this geography.
When investors talk about geopolitical risk in Asia, they often focus on the US-China relationship. The Japan dimension is just as important — and older, and less likely to be solved by a trade deal.
My take: Xi’s reaction when Japan came up in the summit room tells you something the economic data doesn’t. This isn’t just strategic competition. For China’s leadership, Japan represents something unfinished — a humiliation that predates the Communist Party itself. That kind of history doesn’t get negotiated away. It shapes decisions in ways that are hard to price into a spreadsheet.