Military Tensions in the Taiwan Strait — Japan
China's largest-ever military exercise around Taiwan is not merely a threat, but a structural challenge aimed at rewriting the security order of East Asia itself. Japan is facing its most critical military decision in 80 years since the end of the war, and its choice will determine the regional order for decades to come.
── Understand in 3 points ─────────
- • The Chinese People's Liberation Army (PLA) conducted its largest-ever integrated military exercise around Taiwan. The Navy, Air Force, Rocket Force, and Strategic Support Force participated, deploying in a manner that encircled Taiwan.
- • Over 70 vessels, including the aircraft carrier "Fujian," and more than 150 fighter jets and bombers were reported to have participated in the exercise, significantly exceeding the scale of the exercise during Pelosi's visit to Taiwan in 2022.
- • Reports have successively indicated that the Japanese government held urgent consultations with the United States and is specifically considering scenarios for the Self-Defense Forces' response in the event of a Taiwan contingency.
── NOW PATTERN ─────────
As the "spiral of conflict" between the US and China over the Taiwan Strait accelerates, Japan faces the risk of an "alliance strain" between its alliance obligations and independent diplomacy, while China is on the verge of military "power overreach."
── Probability and Response ──────
• Base case 55% — Gradual reduction in the scale of Chinese military exercises, intermittent resumption of military dialogue between the US and China, trends in Japan's defense spending execution rate, progress of the TSMC Kumamoto factory, changes in the tone of diplomatic communication from the Taiwanese Presidential Office
• Bull case 15% — Announcement of a US-China summit, significant reduction in Chinese military exercises, full resumption of US-China military dialogue channels, implementation of a Japan-China leaders' phone call, substantial expansion of China's domestic economic stimulus measures
• Bear case 30% — Reports of accidental military contact in the Taiwan Strait, surge in Chinese cyberattacks, additional deployment of US carrier strike groups to the Western Pacific, heightened readiness of Japan's Self-Defense Forces, economic control measures in China suggesting war preparations
📡 THE SIGNAL — What Happened
Why it matters: China's largest-ever military exercise around Taiwan is not merely a threat, but a structural challenge aimed at rewriting the security order of East Asia itself. Japan is facing its most critical military decision in 80 years since the end of the war, and its choice will determine the regional order for decades to come.
- Military — The Chinese People's Liberation Army (PLA) conducted its largest-ever integrated military exercise around Taiwan. The Navy, Air Force, Rocket Force, and Strategic Support Force participated, deploying in a manner that encircled Taiwan.
- Military — Over 70 vessels, including the aircraft carrier "Fujian," and more than 150 fighter jets and bombers were reported to have participated in the exercise, significantly exceeding the scale of the exercise during Pelosi's visit to Taiwan in 2022.
- Diplomacy — Reports have successively indicated that the Japanese government held urgent consultations with the United States and is specifically considering scenarios for the Self-Defense Forces' response in the event of a Taiwan contingency.
- Policy — Japan's Ministry of Defense strengthened troop deployments in the Nansei Islands and raised the readiness level of missile units on Yonaguni Island, Ishigaki Island, and Miyako Island.
- Economy — The Taiwan Strait is the most critical sea lane, through which approximately 20% of global trade passes. If blockaded, about 90% of Japan's energy imports would be affected.
- Semiconductors — Taiwan's TSMC manufactures approximately 90% of the world's advanced semiconductors (7nm and below), and a Taiwan contingency would inflict catastrophic damage on global supply chains.
- Public Opinion — An NHK public opinion poll (March 2026) showed a deep division among the public regarding Japan's involvement in the Taiwan issue, with 62% believing Japan "should be cautious" and 28% believing it "should be actively involved."
- Alliance — The Guidelines for Japan-U.S. Defense Cooperation, revised in 2024, concretized the Self-Defense Forces' rear-area support missions in "situations that will have an important influence" (重要影響事態), including a Taiwan contingency.
- Legal System — The Japanese government is internally re-examining the criteria for recognizing a "situation threatening Japan's survival" (存立危機事態) under security-related legislation, and is proceeding with the legal clarification of whether a Taiwan contingency would fall under Japan's survival-threatening situation.
- International — The AUKUS (US, UK, Australia) framework is expanding, with discussions progressing on "AUKUS+" including Japan. Deeper information sharing and technological cooperation are being explored.
- Domestic China — The Xi Jinping administration has set "completion of Taiwan unification capability" as a goal for the PLA's 100th anniversary in 2027, and military exercises are analyzed as part of demonstrating that capability.
- Economic Sanctions — The United States is considering additional sanctions on Chinese military-related companies, and export controls on semiconductor manufacturing equipment to China, including those from Japanese companies, are expected to be further tightened.
The current tensions surrounding the Taiwan Strait did not emerge overnight. Their roots trace back to the founding of the People's Republic of China in 1949 and the Kuomintang's retreat to Taiwan, and for over 75 years since, the structural contradiction of an "unfinished civil war" has persisted as an underlying current in East Asia's security order.
During the Cold War, the United States adopted a policy of strategic ambiguity, obligating itself to provide Taiwan with necessary defensive weapons under the Taiwan Relations Act (1979) while maintaining its "One China" policy. This ambiguity functioned as a clever balancing mechanism that maintained stability in the Taiwan Strait for decades, but in the 2020s, that balance is rapidly eroding.
Multiple turning points exist. First, the rapid modernization of China's military power. The PLA's naval strength surpassed the US Navy in terms of ship numbers in the 2020s, and particularly with the improvement of its A2/AD (Anti-Access/Area Denial) capabilities, it has dramatically increased the cost of US military intervention around Taiwan. The deployment of anti-ship ballistic missiles like the DF-21D and DF-26 makes it physically difficult for US carrier strike groups to approach the Taiwan Strait.
Second, the link between Xi Jinping's personal political ambition and Taiwan's unification. At the 20th Party Congress in 2022, Xi Jinping explicitly stated that "Taiwan's unification is an inevitable requirement for the great rejuvenation of the Chinese nation," making his legacy and the Taiwan issue inseparable. The PLA's 100th anniversary in 2027 serves as a symbolic deadline, and this "political timeline" is accelerating the pace of military preparations.
Third, the deepening of Taiwan's democracy and the transformation of its identity. Public opinion polls in Taiwan show that the percentage of people identifying as "Taiwanese" has reached a record high of 83%, while those desiring unification with China has fallen to below 5%. This irreversible transformation of identity has virtually eliminated the feasibility of Beijing's "peaceful unification" scenario, structurally promoting a tilt towards military options.
For Japan, the Taiwan issue cannot be "someone else's problem" either geographically or economically. Yonaguni Island is only 110 kilometers from Taiwan's easternmost point, and a Taiwan contingency would automatically become a security issue for Japan's Nansei Islands. Furthermore, if the sea lanes in the Taiwan Strait and South China Sea, through which approximately 90% of Japan's energy imports pass, are blocked, the Japanese economy would become dysfunctional within weeks.
Historically, Japan's involvement with Taiwan spanned 50 years, from its rule under the Treaty of Shimonoseki in 1895 until its defeat in 1945, and the memory of this colonial era forms a complex historical layer in Japan-China-Taiwan relations. Post-war Japan concluded the Japan-Republic of China Peace Treaty with the Republic of China (Taiwan) in 1952, but abrogated it upon the normalization of diplomatic relations with China in 1972, and has since maintained a "One China" stance.
However, the rapid changes in the security environment in the 2020s are making it difficult for Japan to maintain this "ambiguous stance." With the revision of the three security-related documents in 2022, explicitly stating the possession of "counterstrike capabilities" and deciding to raise defense spending to 2% of GDP from fiscal year 2023 onwards, Japan has effectively begun a major shift from its post-war exclusive defense-oriented policy (専守防衛). The 2024 revision of the Japan-U.S. Guidelines for Defense Cooperation for the first time detailed the specific roles of the Self-Defense Forces in a Taiwan contingency scenario, signifying a qualitative transformation of the Japan-U.S. alliance.
The essence of the current crisis is that the structural contradiction between the shift in the balance of power due to China's rise and the existing security order (the US-led hub-and-spoke alliance system) is reaching a level that can no longer be managed by "strategic ambiguity." The Taiwan Strait is the fault line where this structural contradiction is most acutely manifested, and Japan is situated precisely on that fault line.
The delta: With China's military exercises around Taiwan being conducted on a scale significantly exceeding that of Pelosi's visit in 2022, both in quantity and quality, a "Taiwan contingency" has transformed from a hypothetical discussion into a concrete policy issue. The fact that the Japanese government has begun publicly considering response measures, including the dispatch of the Self-Defense Forces, indicates an irreversible turning point in Japan's post-war security policy.
🔍 BETWEEN THE LINES — What the Reports Aren't Saying
While official statements emphasize "strengthening the deterrence of the Japan-U.S. alliance," the reality is that what Japanese policymakers fear most is not a Chinese invasion itself, but being presented with a choice between "participation or bystander" if the U.S. decides to defend Taiwan. Within the Ministry of Defense, the formulation of an "escalation ladder" to incrementally set Japan's involvement level in a Taiwan contingency is rapidly underway. However, the biggest obstacle is not legal constraints, but the lack of preparedness in public opinion. The true purpose of China's exercise is not only to intimidate Taiwan but also largely serves as a "stress test" to gauge the cohesion of the Japan-U.S. alliance.
NOW PATTERN
Spiral of Conflict × Alliance Strain × Power Overreach
As the "spiral of conflict" between the US and China over the Taiwan Strait accelerates, Japan faces the risk of an "alliance strain" between its alliance obligations and independent diplomacy, while China is on the verge of military "power overreach."
Intersection of Dynamics
The three dynamics of "spiral of conflict," "alliance strain," and "power overreach" interact complexly on the geopolitical fault line of the Taiwan Strait, amplifying the crisis.
First, the "spiral of conflict" brings "alliance strain" to the surface. As tensions between the US and China escalate, Japan is forced to choose between alliance obligations and independent diplomacy, deepening domestic divisions. If Japan fails to show clear commitment, doubts about "alliance reliability" will arise within the US; conversely, if Japan actively commits, it will pay the price of deteriorating economic relations with China. This structural dilemma delays Japan's policy response and reduces the effectiveness of crisis management.
Next, "power overreach" accelerates the "spiral of conflict." When China continues its military expansion despite economic difficulties, its actions become increasingly unpredictable. This is because economic stagnation encourages a tilt towards nationalism, increasing the risk of military adventurism. Historically, the tendency for declining great powers to rely on military force is a pattern seen in the Austro-Hungarian Empire in 1914 and Imperial Japan in the 1930s, and this analogy may apply to present-day China.
Furthermore, "alliance strain" induces "power overreach." If doubts arise about the cohesion of the Japan-U.S. alliance, China is more likely to make the miscalculation that "now is the time to act." Just as Russia's invasion of Ukraine in 2022 was based on a miscalculation of NATO's weakness, alliance strain risks sending incorrect signals to aggressors.
The most dangerous aspect of the interaction of these three dynamics is that each dynamic forms a positive feedback loop that reinforces the other two. Once this loop crosses a critical threshold, an "emergent crisis" could occur that no single actor can control. This structural risk is precisely what makes the Taiwan Strait crisis the most dangerous geopolitical confrontation since the Cold War.
📚 PATTERN HISTORY
1914: European Alliance System Before World War I
Spiral of Conflict
Structural similarities to the present: The security dilemma and alliance commitment problems acted in a chain reaction, escalating a local crisis like the Sarajevo incident into a world war. The absence of automatic alliance activation mechanisms and crisis management channels led to unintended escalation.
1995-96: Third Taiwan Strait Crisis
Power Overreach and Successful Deterrence
Structural similarities to the present: In response to China's missile exercises, the U.S. successfully deterred by deploying two aircraft carriers to the Taiwan Strait. However, this experience motivated China's A2/AD strategy, and 30 years later, deterrence using the same methods has become difficult. Changes in the military balance have fundamentally altered the structure of deterrence.
1938-41: Japan's Southern Advance and War with the U.S.
Power Overreach and Economic Blockade
Structural similarities to the present: Military expansion for resource acquisition led to economic sanctions by the U.S. and U.K., and the oil embargo created a choice between "waiting to die or fighting." The pattern of economic pressure accelerating military adventurism is a lesson applicable to present-day China.
1962: Cuban Missile Crisis
Spiral of Conflict and Crisis Management
Structural similarities to the present: The US-Soviet crisis, on the brink of nuclear war, was averted by the existence of secret diplomatic channels and the rational judgment of both leaders. This experience led to the establishment of a hotline between the US and Soviet Union, institutionalizing crisis management mechanisms. The greatest risk is the absence of this level of crisis management mechanism between the current US and China.
2014: Russia's Annexation of Crimea
Alliance Strain and Fait Accompli
Structural similarities to the present: Exploiting doubts about NATO's cohesion and Ukraine's non-alliance status, Russia succeeded in changing the status quo by military force. However, in the full-scale invasion of 2022, a miscalculation of NATO's cohesion led to a protracted war. Alliance strain can lead aggressors to incorrect calculations.
Patterns Revealed by History
The most important lesson from historical precedents is the fatal nature of "miscalculation" in great power conflicts. The European powers in 1914 all anticipated a short war, Japan in 1941 underestimated the U.S.'s will to fight, and Russia in 2022 misjudged Ukraine's resistance and NATO's cohesion. In all cases, the wars escalated far beyond initial expectations in scale and duration.
Applying this pattern to the current Taiwan Strait, the greatest risk is China's miscalculation that it "can seize Taiwan in a short decisive battle," or the U.S. and Japan's miscalculation that "deterrence will continue to function." History teaches that sudden collapses after long periods of stability are the most destructive. The experience of the 1995-96 Taiwan Strait Crisis, which ended relatively peacefully, may have fostered overconfidence that "crises are manageable." However, the military balance, domestic politics, and structure of economic interdependence are fundamentally different now compared to then, making past successes dangerous as a guide for the current situation. As the Cuban Missile Crisis taught, crisis avoidance requires both institutionalized dialogue channels and rational judgment from both sides, but neither is sufficiently present in current US-China relations.
🔮 WHAT'S NEXT
China's military exercises will gradually decrease in scale, but a "new normal" of military activity around Taiwan will be established. Incursions by Chinese military aircraft into Taiwan's Air Defense Identification Zone will become routine, and naval vessels will regularly circumnavigate Taiwan. This is an extension of the pattern established after Pelosi's visit in 2022, with China gradually intensifying pressure in the "gray zone." Japan will accelerate its defense buildup but will not engage in direct military involvement. While troop reinforcements in the Nansei Islands, expansion of Japan-U.S. joint exercises, and strengthening of information-sharing systems will proceed, Japan will postpone a conclusion on the criteria for recognizing a "situation threatening Japan's survival" (存立危機事態) and attempt to maintain strategic ambiguity. Defense spending will be maintained at 2% of GDP, but delays in equipment procurement and personnel shortages will constrain its effectiveness. Economically, the diversification of supply chains, factoring in Taiwan risk, will progress, and investment in TSMC's Japan factory (Kumamoto Plant No. 2, scheduled to operate in 2026) will accelerate. However, economic relations between Japan and China will maintain a certain level of tension but will not lead to a large-scale rupture. In this scenario, no decisive military conflict will occur in 2026, but tensions in the Taiwan Strait will structurally remain high, and the risk of accidental clashes will gradually increase. The "normalization of crisis" is the main characteristic, and this itself creates new risks.
Implications for Investment/Action: Gradual reduction in the scale of Chinese military exercises, intermittent resumption of military dialogue between the US and China, trends in Japan's defense spending execution rate, progress of the TSMC Kumamoto factory, changes in the tone of diplomatic communication from the Taiwanese Presidential Office
High-level diplomacy between the US and China progresses, significantly easing tensions in the Taiwan Strait. This is underpinned by the dynamic where China's economic slowdown becomes more severe than expected, leading the Xi Jinping administration to prioritize domestic economic stability and curb external adventurism. Specifically, a US-China summit materializes, and a provisional agreement on mutual restrictions of military activities in the Taiwan Strait is reached. For Japan, this scenario represents the best case, allowing for the securing of time for defense buildup while stabilizing economic relations with China. Japan-China summit dialogues resume, and a redefinition of the "strategic reciprocal relationship" (戦略的互恵関係) is attempted. However, even in this scenario, the fundamental resolution of the Taiwan issue (unification or independence) remains shelved, making it highly likely that the easing of tensions will be temporary. The realization of this scenario requires three conditions to be met simultaneously: the suppression of nationalist forces within China, political tolerance for rapprochement with China ahead of the US presidential election, and Taiwan's restrained diplomatic posture, making its probability low. However, as the US presidential election approaches in late 2026, there is a non-zero possibility that the incumbent administration may become more amenable to dealing with China in pursuit of diplomatic achievements.
Implications for Investment/Action: Announcement of a US-China summit, significant reduction in Chinese military exercises, full resumption of US-China military dialogue channels, implementation of a Japan-China leaders' phone call, substantial expansion of China's domestic economic stimulus measures
An accidental military clash occurs in the Taiwan Strait, escalating into a regional crisis. Specifically, an abnormal proximity between Chinese military aircraft and Taiwanese military aircraft during a Chinese exercise, or a collision between vessels at sea, occurs, leading to a loss of escalation control. An accidental incident like the 2001 Hainan Island incident (US-China military aircraft collision) could, under current high tensions, turn into an unmanageable escalation. Japan would immediately be pressed to recognize a "situation that will have an important influence" (重要影響事態), and Self-Defense Forces' rear-area support activities (supply to US forces, information provision, facility use) would commence. In the worst case, a scenario where Chinese missiles are launched towards US military facilities in the Nansei Islands (such as Kadena Air Base) is also conceivable, forcing Japan to make the post-war's first decision to recognize a "situation of armed attack" (武力攻撃事態) and exercise the right of collective self-defense. Economically, restrictions on navigation in the Taiwan Strait would disrupt global shipping, and energy prices would surge. Sea lanes between the Middle East and Japan, through which approximately 80% of Japan's crude oil imports pass, would be threatened, necessitating the release of oil reserves. Disruption of the semiconductor supply chain would halt the production of automobiles, electronic devices, and communication equipment, potentially leading to a 5-10% plunge in Japan's GDP. In financial markets, risk-off sentiment would accelerate, with a simultaneous surge in the yen (as a safe-haven asset) and a crash in the Nikkei average. While the probability of this scenario is not low, the expansion to full-scale war would be devastating for both sides, so a certain degree of restraint remains possible.
Implications for Investment/Action: Reports of accidental military contact in the Taiwan Strait, surge in Chinese cyberattacks, additional deployment of US carrier strike groups to the Western Pacific, heightened readiness of Japan's Self-Defense Forces, economic control measures in China suggesting war preparations
Key Triggers to Watch
- PLA's military capability demonstrations and Xi Jinping's Taiwan-related statements leading up to its 100th anniversary: April 2026 - August 2027
- Next implementation of the Japan-U.S. joint military exercise "Keen Sword" and whether a Taiwan contingency scenario is incorporated: October - November 2026
- Changes in US policy towards China and candidates' Taiwan-related statements ahead of the US presidential election: June - November 2026
- Trends in the number of Chinese military aircraft incursions into Taiwan's Air Defense Identification Zone (over 100 times per month is a danger zone): Continuous monitoring
- Start of operations for TSMC Kumamoto Plant No. 2 and progress in Japan's semiconductor supply chain autonomy: Late 2026
🔄 TRACKING LOOP
Next Trigger: Timing and scale of the next large-scale exercise by China's PLA Eastern Theater Command (possible in April-May 2026) — If the exercise scale exceeds the current one, it confirms the acceleration of the "spiral of conflict"
Continuation of this Pattern: Tracking: Gradual escalation path of military tensions in the Taiwan Strait — The next key milestone is whether a Taiwan contingency scenario is formally incorporated into the Japan-U.S. joint exercise "Keen Sword" in autumn 2026
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