Caroline Rose, a professor of Sino-Japanese relations at the University of Leeds in Britain, said many observers had initially hoped that a symbolic dispatch of ships to the islets would quickly return the situation to the status quo. That's less likely now, Rose said.
"I don't know that there's a quick, easy face-saving measure to be found … but eventually they will probably have to agree to disagree," she said. A "short, sharp downturn" is likely in the near term, but the long term is murkier, she added, noting that Japanese businesses rebounded within a year after the 2005 protests.
For now, the travel and tourism sectors are feeling some of the strongest effects. All Nippon Airways said 18,000 tickets on flights between the two countries had been canceled in recent days, Japan's Nikkei economic newspaper reported. China withdrew its contingent from this week's Japan Open badminton tournament in Tokyo, Agence France-Presse reported.
James Reilly, author of "Strong Society, Smart State: The Rise of Public Opinion in China's Japan Policy," said the dispute, along with another islands fight between Japan and South Korea, had soured "a lot of encouraging signs that had been developing among China, Japan and South Korea on a range of broad economic issues in the past year," such as expanding currency swaps.