BMI View: North East Asia will experience increasing geopolitical tensions over the coming decade as China rises and Japan seeks to counterbalance Beijing with US support. Although North Korea and Taiwan are traditionally the main flashpoints in the region, other sources of instability, such as the Sino-Japanese maritime dispute, will merit considerable attention and will require a major effort to manage. North East Asia will experience increasing geopolitical rivalry for the foreseeable future, due to the shifting dynamics between a rising China and a still powerful Japan and Russia, with the US seeking to maintain its role as the regional balancer. North Korea, and to a much lesser degree Taiwan, will remain key flashpoints to watch, while the maritime dispute between Japan and China over the Senkaku Islands (known as Diaoyu in China) in the East China Sea will merit increasing attention. Overall, we believe the major powers will work to contain any escalation of tensions, as no country is willing to become embroiled in new hostilities. Nonetheless, historical mistrust of Japan on the part of China and the Koreas, owing to Tokyo's World War Ⅱ legacy, and potentially between China and South Korea over the future of the Korean Peninsula, mean that old tensions will re-emerge from time to time. Consequently, we cannot preclude limited armed clashes resulting from miscalculation at times of heightened tensions. The dispute over the Senkaku/Diaoyu islands is one such flashpoint.
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