Riot police gather as anti-Japanese protesters demonstrate over the disputed Diaoyu Islands, on September 16, 2012 in Shenzhen, China. Protests have taken place across China in a dispute that is becoming increasingly worrying for regional stability.
Credit: Lam Yik Fei

TOKYO, Japan — Days after a territorial dispute sparked demonstrations and attacks on Japanese businesses in dozens of Chinese cities, all appeared quiet in the East China Sea on Thursday.

Relations between the two East Asian powers have sunk to their lowest point since they normalized diplomatic ties 40 years ago.

The catalyst: The Japanese government's decision last week to take control over the Senkakus, a group of five islands also claimed by China, where they are known as the Diaoyu.

For a few unsettling days, citizens across China were given a rare opportunity to vent their anger on the streets — provided their grievances were directed at "little Japan" rather than at their own government. They torched Japanese factories and car dealerships, damaged other businesses and called for a boycott of Japanese imports.

While it pressed ahead with the purchase of three of the islands, which it had been leasing from their private Japanese owners since the 1930s — Japan appeared helpless to prevent the attacks on its economic interests. When news broke earlier this week that a flotilla of up to 1,000 Chinese fishing vessels were heading towards the contested islands, it seemed for a moment that the dispute could escalate into a maritime clash.

More from GlobalPost: Anti-Japanese protests cool, but economic effects could be long-lasting

The intensity of the outpouring of anti-Japanese sentiment, which led to the temporary closure of businesses and a sharp drop in two-way travel, may have taken Japan by surprise. But, according to the deputy prime minister, Katsuya Okada, the country had anticipated that its nationalization of the Senkakus would not go unchallenged.

"To an extent we expected the Chinese would oppose the move, but we also considered how much worse the situation might have turned out had they been bought by the Tokyo metropolitan government," he told a group of foreign journalists.

Okada refused to apportion blame, but tensions over the islands heightened in April after the governor of Tokyo, Shintaro Ishihara, proposed that three of the islands be bought by the city's government, with funds raised among the public, with the aim, he said, of protecting them against Chinese intrusion.

Ishihara, whose career in politics has practically been defined by Sino-phobia, had also proposed building facilities on the Senkakus — a move that would have provoked even greater anger in Beijing.

More from GlobalPost: What China and Japan stand to gain, and lose, in Senkaku

"What is important at this point is for the Japanese and Chinese governments to make efforts to calmly improve the situation," Okada said.

As Japanese coast guard and Chinese surveillance vessels continued to play cat and mouse in waters close to the islands on Thursday, the country began to take stock of prime minister Yoshihiko Noda's response to the crisis.

Aside from repeating US calls for cool heads to prevail, Noda did little more than repeat Japan's assertion that the territorial dispute exists only in the minds of the Chinese: Japan has, and will always have, control of the islands as an integral part of its territory.

If anything, Noda has more to fear at home than from Beijing. As he dealt with the crisis, his prospective opponents in a general election many expect to take place in November were accusing him of failing to protect Japan's interests.

Three years after it swept into office and ended more than 50 years of almost uninterrupted conservative rule, Noda's Democratic Party of Japan [DPJ] has little to show for promises it would transform the country's domestic and foreign policy.

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Its term has been marked by political instability — Noda is the third DPJ prime minister in as many years — internal squabbling and botched policies on everything from relations with the US to tax reform and the future of nuclear energy.

There is every expectation that Japan could revert to an administration led by the Liberal Democratic party (LDP), strongly pro-US and traditionally suspicious of China.

Shigeru Ishiba, a former defense minister and the man tipped to lead the LDP into the general election after the party elects a new leader on Sept. 26, suggested he would take a more aggressive stance. "Losing a piece of our territory eventually means losing the whole country," he told reporters this week.

Tomohiko Taniguchi, a former foreign ministry spokesman who now teaches at Keio University, said Noda's biggest shortcoming over the past week was his failure to make Japan's case to the international community. "You could hardly say that he has handled this in a skillful fashion," Taniguchi told GlobalPost.

"If any Japanese prime minister describes the dispute in a way that caters only to Japanese public opinion and portrays it as a simple contest between Japan and China, the rest of the world will judge Japan as narrow and nationalistic."

Instead, Noda should have stressed the pivotal geopolitical reasons why it can never give in to Chinese demands over the islands. "Japan has to say to the rest of the world that if it loses the Senkakus, it will put the future maneuverability of the US 7th fleet in the East China Sea in question. Whoever the next prime minister is has to make that case."

Taniguchi is not alone in sensing that the economic impact of the latest row, involving countries with bilateral trade worth $345 billion last year, will be short-lived. That said, he suggested that the clearest response to the violence of last weekend could come not from Japan's politicians, but from its boardrooms.

"It's almost inevitable that many Japanese business leaders [with investments in China] will say that enough is enough. Wages in China are going up and other countries in the region, such as Burma, are looking more attractive. This dispute can only accelerate the business community's shift in another direction."

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