China and Japan tensions remain high; risk trades to be affected?

A Chinese navy vessel has been reportedly making use of a radar designed to aim weapons to a particular target against a Japanese navy ship in the East China Sea, Reuters reports this morning. Both Chinese and Japanese continue to patrol around the islands using fighter jets and ships.

Japan's defense minister told the press that such incident is not helping to ease tension over disputed islands. According to Japanese Defense Minister Itsunori Onodera, cited by Reuters: "Projecting fire control radar is very unusual. One mistake, and the situation would become very dangerous."

Reuters also cites Chinese Foreign Ministry spokeswoman Hua Chunying, who said: "We believe that what is most urgent is for Japan to stop provocative actions like regularly sending in ships and aircraft into the waters around the Diaoyu Islands ... and seek, via talks with China, an effective way to appropriately control and resolve this issue."

According to Sean Lee, founder at FXWW, "escalating tensions in the East China Sea between China and Japan could again become a more important issue in coming days; this could see risk trades like AUD/USD or AUD/CHF affected as the market is unlikely to want to buy JPY."