Military Tensions in the Taiwan Strait — A Spiral
The frequency of China's military exercises around Taiwan has reached an all-time high, posing the greatest structural challenge to the Japan-U.S. alliance since the Cold War. The outcome of this crisis will define the security order of the Indo-Pacific for decades.
── Understand in 3 points ─────────
- • The Chinese People's Liberation Army (PLA) significantly increased the frequency of military exercises around Taiwan from the latter half of 2025, conducting an average of more than three large-scale exercises per month in Q1 2026.
- • The number of PLA aircraft sorties crossing the Taiwan Strait median line exceeded 1,700 in 2025, an increase of approximately 40% from about 1,200 in 2024.
- • The Chinese Navy conducted exercises in the waters east of Taiwan with a three-carrier system, including the aircraft carrier "Fujian," demonstrating its "rear blockade" capability against Taiwan.
── NOW PATTERN ─────────
Tensions in the Taiwan Strait are a structural crisis driven primarily by a "spiral of conflict," compounded by the risk of "alliance strain" within the Japan-U.S. alliance and the "path dependency" of the arms race.
── Probabilities and Responses ──────
• Base case 55% — PLA exercise frequency stabilizes at around three times per month, U.S.-China military dialogue channels are maintained, and merchant shipping traffic in the Taiwan Strait sees only a gradual decrease.
• Bull case 20% — Direct meeting between Xi Jinping and Trump realized, decrease in PLA exercise frequency, activation of U.S.-China military hotline, decrease in Taiwan Strait insurance rates.
• Bear case 25% — Accidental collision incident during PLA exercises, signs of Chinese military transitioning to full mobilization, intensification of military threats against Taiwan's outlying islands, surge in cyberattacks.
📡 THE SIGNAL — What Happened
Why it matters: The frequency of China's military exercises around Taiwan has reached an all-time high, posing the greatest structural challenge to the Japan-U.S. alliance since the Cold War. The outcome of this crisis will define the security order of the Indo-Pacific for decades.
- Military Trends — The Chinese People's Liberation Army (PLA) significantly increased the frequency of military exercises around Taiwan from the latter half of 2025, conducting an average of more than three large-scale exercises per month in Q1 2026.
- Military Trends — The number of PLA aircraft sorties crossing the Taiwan Strait median line exceeded 1,700 in 2025, an increase of approximately 40% from about 1,200 in 2024.
- Military Trends — The Chinese Navy conducted exercises in the waters east of Taiwan with a three-carrier system, including the aircraft carrier "Fujian," demonstrating its "rear blockade" capability against Taiwan.
- Diplomacy — The Japanese and U.S. governments reaffirmed the importance of peace and stability in the Taiwan Strait at the Japan-U.S. Security Consultative Committee (2+2) in December 2025, and are advancing the concretization of joint operational plans.
- Diplomacy — The Chinese Ministry of Foreign Affairs strongly reacted to the Japan-U.S. joint statement as "interference in internal affairs" and temporarily recalled the Chinese Ambassador to Japan.
- Domestic Politics — A public opinion poll in Japan (February 2026, Yomiuri Shimbun) showed that 58% of respondents "supported" an expanded role for the Self-Defense Forces, reaching an all-time high.
- Economy — Amid rising risks of a Taiwan contingency, TSMC's plan for additional investment (third factory) in its Kumamoto, Japan plant has accelerated, expanding the total investment to approximately 3 trillion yen.
- Economy — Maritime insurance rates for the Taiwan Strait have surged approximately threefold since the latter half of 2025, leading to a sharp increase in logistics costs for vessels transiting the strait.
- Military Trends — The U.S. military decided in early 2026 to permanently deploy the "Typhon" intermediate-range missile to northern Luzon, Philippines, strengthening its defense posture along the First Island Chain.
- Security — The Japanese government increased the defense budget for FY2026 to approximately 8.5 trillion yen, reaching about 1.5% of GDP, clearly accelerating towards the NATO standard 2% target for FY2027.
- Technology — Japan and the U.S. agreed on a new framework to jointly develop interception technology for hypersonic glide vehicles (HGVs), aiming for practical application by 2028.
- International Relations — Indo-Pacific nations, including Australia, the Philippines, and South Korea, issued a joint statement on "freedom of navigation in the Taiwan Strait," expanding multilateral cooperation.
The current military tensions surrounding the Taiwan Strait should not be understood as sudden events, but rather as the result of the intersection of at least four historical structural shifts.
First, Taiwan's unification is positioned at the core of China's national epic of recovery from the "century of humiliation." Since the end of the Chinese Civil War in 1949, Taiwan has been an "unfinished revolution" for the Chinese Communist Party, and the Xi Jinping administration, since taking office in 2012, has made the "great rejuvenation of the Chinese nation" the Party's highest goal. In the 20th Party Congress in 2022, Xi Jinping explicitly stated that Taiwan's unification "must be realized" and refused to renounce the use of force. This rhetoric is not merely rhetorical; acquiring the military capability to enable Taiwan's unification by 2027 has been set as a core objective of PLA modernization. 2026 is precisely the year preceding this "capability acquisition year," making it strategically the most prone to heightened tensions as the Chinese military verifies its readiness and externally demonstrates its capabilities.
Second, there is a structural transformation in U.S.-China relations. Since the first Trump administration in 2017, the U.S. has clearly positioned China as a "strategic competitor," and this perception has become a bipartisan consensus through the Biden administration. The second Trump administration, inaugurated in 2025, has further sharpened its China policy, accelerating arms supplies to Taiwan, strengthening semiconductor export controls, and expanding its military presence in the Indo-Pacific. From China's perspective, this series of moves represents a resurgence of "containment" policy, further narrowing the room for compromise on the Taiwan issue. The "security dilemma," where both the U.S. and China interpret the other's intentions in the worst possible light, is deepening, accelerating a vicious cycle where one's defensive measures appear as offensive threats to the other.
Third, there is a historic shift in Japan's security policy. The "Three Security Documents" (National Security Strategy, National Defense Strategy, and Defense Buildup Program) approved by the Cabinet in December 2022 marked the biggest turning point in Japan's post-war security policy. With the acquisition of counterstrike capabilities (enemy base attack capabilities), an increase in defense spending to 2% of GDP, and the establishment of a Joint Operations Command, Japan has effectively redefined its "exclusive defense-oriented policy." This shift is underpinned by a deepening recognition that a Taiwan contingency directly impacts Japan's security, in addition to the missile threat from North Korea. Yonaguni Island, Japan's closest territory to Taiwan, is only about 110 kilometers away, making a Taiwan contingency geographically inseparable from a Japan contingency.
Fourth, the technology hegemony competition, centered on semiconductors, has elevated the strategic value of the Taiwan Strait to an unprecedented degree. Taiwan's TSMC manufactures approximately 90% of the world's advanced semiconductors (7 nanometers and below), and instability in the Taiwan Strait would have a devastating impact on the entire global economy. Consequently, the Taiwan issue is no longer merely a bilateral geopolitical dispute between the U.S. and China but has become a global challenge concerning the stability of global supply chains. With Japan, Europe, South Korea, and others now having direct economic stakes in the stability of the Taiwan Strait, the issue is becoming increasingly multilateral.
It is no coincidence that these four structural factors are intersecting at the current juncture of 2026. The approaching target year for PLA capability acquisition, the entrenchment of the U.S.'s hardline stance against China, Japan's transition to the implementation phase of defense strengthening, and the ongoing reorganization of semiconductor supply chains are all progressing simultaneously. This creates a structure where all actors are prone to the perception that "if we don't act now, we will miss the opportunity." Historically, situations where multiple great powers share such a perception simultaneously represent the most dangerous phase.
The delta: The biggest change is that China's military exercises around Taiwan have undergone a "qualitative transformation." The content has shifted from conventional intimidation-focused exercises to integrated operational training simulating actual combat, incorporating maritime blockade simulations and amphibious landing drills. In response, Japan and the U.S. have openly begun to concretize joint operational plans, clearly forming a spiral of conflict where both sides demonstrate "accelerated preparations."
🔍 BETWEEN THE LINES — What the News Isn't Saying
The biggest variable not discussed in official statements is the linkage between China's domestic economic distress and the Taiwan issue. For the Xi Jinping administration, facing the triple pressures of a prolonged real estate crisis, persistently high youth unemployment, and local government debt problems, the Taiwan issue serves as the easiest means to divert domestic discontent outwards, while also functioning as a "pressure release" for hardliners within the military. What U.S. and Japanese security officials most fear is a scenario where the premise of China acting based on rational strategic calculations breaks down—that is, the possibility of Xi Jinping resorting to irrational risk-taking due to domestic political pressures. While rarely mentioned officially, this is the true reason behind the acceleration of Japan-U.S. joint operational plans.
NOW PATTERN
Spiral of Conflict × Alliance Strain × Path Dependency
Tensions in the Taiwan Strait are a structural crisis driven primarily by a "spiral of conflict," compounded by the risk of "alliance strain" within the Japan-U.S. alliance and the "path dependency" of the arms race.
Intersection of Dynamics
The three dynamics—spiral of conflict, alliance strain, and path dependency—form a dangerous complex structure that mutually reinforces one another. First, there is a relationship where the spiral of conflict accelerates path dependency. As the security dilemma between the U.S. and China deepens, both sides increase military investment, and that investment creates new faits accomplis, further spinning the spiral. The commissioning of China's aircraft carrier "Fujian" becomes a reason for Japan and the U.S. to rush standoff defense capabilities, and the deployment of U.S. and Japanese missiles becomes a reason for China to further strengthen its A2/AD (Anti-Access/Area Denial) capabilities. This mutual reinforcement mechanism tends to accelerate the pace of the arms race beyond initial expectations.
Next, there is a risk that path dependency will expose alliance strain. As Japan and the U.S. each pursue their own path-dependent arms buildups, differences in strategic priorities and operational concepts may surface. Situations where the U.S. calls for missile basing in the Nansei Islands for deterrence against China, while local Japanese residents oppose it, would undermine alliance cohesion. Furthermore, the gap between the role the U.S. expects Japan to play in Taiwan's defense and Japan's legal and political constraints could lead to critical delays in coordination during a crisis.
Moreover, alliance strain can have a paradoxical effect on the spiral of conflict. If China perceives the cohesion of the Japan-U.S. alliance to be wavering, deterrence could weaken, potentially inducing more assertive actions from China. Conversely, if Japan and the U.S. bridge their differences and present an overly unified response, China might intensify its sense of crisis regarding "encirclement" and adopt a more aggressive posture. Thus, these three dynamics do not represent simple cause-and-effect relationships but form feedback loops, creating policy dilemmas where addressing one dynamic can exacerbate another. Without understanding this complex structure, crisis management in the Taiwan Strait will remain superficial and symptomatic.
📚 PATTERN HISTORY
1995-1996: Third Taiwan Strait Crisis
China conducted missile exercises ahead of Taiwan's presidential election, and the U.S. deployed two aircraft carriers in response.
Structural similarities with the present: Military intimidation, paradoxically, strengthened Taiwan's democratic consciousness and deepened U.S. involvement. China learned the counterproductive nature of military threats, but the military balance has significantly changed compared to that time.
1962: Cuban Missile Crisis
The U.S. and Soviet Union confronted each other to the brink of nuclear war, then averted the crisis through back-channel negotiations.
Structural similarities with the present: In military confrontations between great powers, informal dialogue channels outside official ones are key to crisis avoidance. Doubts remain about the effectiveness of the current U.S.-China military hotline.
1914: Outbreak of World War I
The path dependency of alliance networks and mobilization plans escalated a localized incident into a great power war.
Structural similarities with the present: Alliance commitments and autonomous military planning mechanisms can trigger escalation beyond political will. Similar risks are latent in the expanding alliance network in the current Indo-Pacific.
2014: Russia's Annexation of Crimea
The rapid creation of a fait accompli left the international community's response lagging.
Structural similarities with the present: When a great power possesses sufficient military capability and aims for a swift resolution, deterrence will not function unless established beforehand. This highlights the importance of preparing for a "fait accompli" scenario in a Taiwan contingency.
1938: Munich Agreement and Sudetenland Crisis
Appeasement policies emboldened aggressors and led to larger conflicts.
Structural similarities with the present: Ambiguous deterrence and compromise can be counterproductive. However, an overly hardline stance also risks cornering the adversary and provoking an outburst. The balance between deterrence and dialogue is extremely critical.
Patterns from History
The most important lesson derived from historical precedents is that "controlled tension" is an illusion in military confrontations between great powers. The lesson of 1914 shows that alliance commitments and the autonomy of military planning can trigger escalation beyond political control. The 1962 Cuban Missile Crisis teaches that informal channels and securing mutual "off-ramps" are essential for crisis management between nuclear powers. The Third Taiwan Strait Crisis of 1995-96 demonstrated that military intimidation can be counterproductive, but that lesson cannot be directly applied to the present, where the military balance has fundamentally changed. Crimea in 2014 showed that if a great power with sufficient military force rapidly creates a fait accompli, a post-facto response will be too late. And Munich in 1938 suggests the danger that excessive appeasement can induce aggression, but simultaneously, that the over-application of this lesson (the tendency to label all compromises as "appeasement") is also dangerous. The current Taiwan Strait crisis contains elements of all these patterns, and policy judgments based on a single historical analogy are perilous. What is required is a simultaneous response to the triple challenge of maintaining credible deterrence, building escalation control mechanisms, and keeping the window for diplomatic solutions open.
🔮 WHAT'S NEXT
Throughout 2026, military tensions in the Taiwan Strait will remain at a high level, but without escalating into a large-scale military conflict. China will continue and intensify military exercises around Taiwan, conducting maritime blockade simulations and large-scale amphibious landing drills, but these will remain within the scope of "intimidation and capability demonstration." Japan and the U.S. will advance the concretization of joint operational plans and strengthen defense postures in the Nansei Islands, but will exercise restraint from actions that overly provoke China. Maritime insurance rates for the Taiwan Strait will further increase, and some merchant vessels will opt for alternative routes, but a complete blockade of maritime traffic will not occur. Diplomatically, the operation of U.S.-China military hotlines and dialogue within multilateral frameworks such as the ASEAN Regional Forum (ARF) will be tenuously maintained. Japan will implement its defense budget increase as planned and accelerate the Self-Defense Forces' shift to the southwest. TSMC's investments in its Japan and U.S. factories will proceed as planned, advancing the diversification of semiconductor supply chains. In this scenario, a "new Cold War"-like long-term confrontation becomes entrenched, and military tensions become "normalized." The greatest risk is that this normalization could dull sensitivity to accidental clashes, potentially leading to more dangerous situations in the future.
Investment/Action Implications: PLA exercise frequency stabilizes at around three times per month, U.S.-China military dialogue channels are maintained, and merchant shipping traffic in the Taiwan Strait sees only a gradual decrease.
Some implicit understanding or formal dialogue framework for managing tensions in the Taiwan Strait is established between the U.S. and China, leading to a gradual de-escalation of military tensions. The realization of this scenario requires multiple conditions. First, signs of improvement in China's domestic economic situation, reducing the Xi Jinping administration's need to rely on adventurism regarding the Taiwan issue. If the real estate market bottoms out and consumption recovers, diplomatic flexibility is more likely to emerge. Second, the Trump administration in the U.S. demonstrates a "deal-making" orientation, seeking some form of transaction with China on the Taiwan issue (e.g., a package of easing U.S.-China trade friction and curbing military activities around Taiwan). Third, Japan successfully acts as a bridge between the U.S. and China through its own diplomatic channels, introducing confidence-building measures (CBMs). For example, if a multilateral agreement on a code of conduct for naval vessels in the Taiwan Strait is established, the risk of accidental clashes could be significantly reduced. In this scenario, maritime insurance rates for the Taiwan Strait would gradually decrease, and the impact on semiconductor supply chains would be limited. However, even if this scenario materializes, it is unlikely to lead to a fundamental resolution of the Taiwan issue, likely remaining a temporary easing of tensions.
Investment/Action Implications: Direct meeting between Xi Jinping and Trump realized, decrease in PLA exercise frequency, activation of U.S.-China military hotline, decrease in Taiwan Strait insurance rates.
An actual armed conflict occurs in the Taiwan Strait due to an accidental military clash or a planned military action by China. The most probable scenario is an accidental clash (e.g., an incident due to an abnormal aircraft approach, a naval vessel collision at sea, misidentification of a cyberattack) occurring during a large-scale PLA exercise, leading to a failure in escalation management. Another possibility is China conducting limited military action against Taiwan's outlying islands (Kinmen or Dongsha Islands), breaching the upper limit of the "gray zone." In either case, Japan and the U.S. would immediately face grave decision-making. If the U.S. intervenes militarily, the risk of a great power war would surge; if it does not intervene, alliance credibility would collapse. Japan would face its greatest post-war political crisis over permission for U.S. military base usage and the deployment of the Self-Defense Forces. The economic impact would be catastrophic, with a blockade of the Taiwan Strait sharply reducing global semiconductor supply, forcing the automotive and electronics industries to halt production. Global GDP is estimated to shrink by 5-10%, an economic blow far exceeding the 2008 financial crisis. Financial markets would be hit by panic selling, accelerating a flight to safe-haven assets. While the probability of this scenario is low, its impact, if it occurs, would be immeasurable.
Investment/Action Implications: Accidental collision incident during PLA exercises, signs of Chinese military transitioning to full mobilization, intensification of military threats against Taiwan's outlying islands, surge in cyberattacks.
Key Triggers to Watch
- Conduct of large-scale, Taiwan Strait-wide blockade-type exercises by the Chinese People's Liberation Army: April-June 2026 (potentially linked to Taiwan's political events or U.S.-Taiwan interactions)
- Approval and announcement of a large-scale U.S. arms supply package to Taiwan: First half of 2026 (linked to congressional approval process)
- Official incorporation of a Taiwan contingency scenario into Japan-U.S. joint integrated exercises: Autumn 2026 (e.g., annual joint exercise "Keen Sword")
- New political statements or timeline mentions regarding Taiwan unification by Xi Jinping: Throughout 2026 (especially around important Party meetings or anniversaries)
- Occurrence of accidental military contact incidents in the Taiwan Strait: Throughout 2026 (risk increases proportionally with exercise frequency)
🔄 TRACKING LOOP
Next Trigger: Next large-scale PLA Eastern Theater Command exercise around Taiwan (expected around April-May 2026) — Whether the scale, duration, and content of the exercise reach a "maritime blockade rehearsal" level will be the most critical indicator determining the year's tension level.
Continuation of this Pattern: Tracking Theme: Taiwan Strait Military Tension Escalation Path — The next milestones are the large-scale PLA exercise in Spring 2026 and the specific agreements reached at the Japan-U.S. "2+2" ministerial meeting.
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