Escalation of tension has scarred relations between Japan and China. The fallout of this has been reflected in the trade and economic ties between the two. Stabilizing China-Japan bilateral relations is critical for peace in the East Asia and it has to be seen how this four-point agreement will translate into action.

There is no doubt that this an audacious foreign policy gambit played by China. Un-named Chinese officials have been quoted in the Chinese press to say that China is willing to instigate strategic confrontation against Japan and are prepared for it to last a 'long time'.

Both the Chinese and Japanese political leadership are whipping up angst and anger against each other and channelling domestic content into feverish nationalism.

Rebuilding Japan’s foreign policy will be another challenge for the Abe Administration, especially in view of the rising tension between Japan and its neighbouring states - China and South Korea – over territorial disputes.

To avoid further deterioration in the bilateral relationship, both Japan and China need to now abandon their hard-line stance and stop escalating nationalistic sentiments among their people.

Considering the complementary interests and interdependencies at stake between China and Japan as also their individual aspirations of nation building through peace and stability, a clash over the Senkakus would only result in a ‘lose-lose’ outcome.

In view of putative conflict for leadership in the region between China and Japan, and barriers in various initiatives for deepening and stabilizing regional financial markets, the economic-security discourse in East Asia is still facing an uncertain prospect and should be continually monitored.