Japan seeks damages as China trawler row lingers

TOKYO/BEIJING (Reuters) - Japan said it will ask China to pay for damage to its patrol boats suffered in a collision with a Chinese trawler, as Asia's top two economies continue to bicker over the affair.

China's newspapers accused Japan of exploiting the dispute to bolster its alliance with the United States and warned that Tokyo couldn't afford the economic price of confrontation with Beijing.

Verbal volleying has continued for days in a quarrel between the two neighbours over Japan's detention of the Chinese skipper of the fishing boat that collided with two Japanese coastguard ships, although he was released and returned home on the weekend.

China, growing more assertive on the regional and global stage, has demanded that Japan apologise and offer compensation.

Japan has rejected those demands and said it would instead ask the Chinese to cover the damage from the incident on September 7 near the islets, known as the Diaoyu in China and Senkaku in Japan.

"Naturally, we will be asking for the boats to be returned to their original condition," Chief Cabinet Secretary Yoshito Sengoku said. "Regardless of us doing it now or later when things have cooled down, this will be the government's task."

The dispute has raised concerns about damage to Sino-Japanese trade ties at a time when Japan is becoming increasingly reliant on China's dynamism for growth.

It has also illustrated the fragility of ties troubled by Chinese memories of wartime occupation by Japan, military mistrust and maritime territorial disputes.

Two Chinese fishery patrol boats had been in the area near the disputed islands, despite repeated complaints from Japan's foreign ministry, Sengoku said.

Comments in Chinese state media underscored the degree of distrust of Japanese intentions in Beijing, and the conviction that the dispute over a single boat captain carried much broader geopolitical implications.

PLAYED UP 'CHINA THREAT'?

The People's Daily, the key mouthpiece of China's ruling Communist Party, said political forces in Japan "exploited intensified contention between China and Japan to play up the 'China threat'" and to build on a deepening of Tokyo's alliance with the United States.

Japan had underestimated China's resolve and misjudged where its own interests lay, said a commentary in the newspaper. Up until now, China's main official newspaper has not given extensive editorial comment on the dispute.

"Japan's development and prosperity cannot be divorced from China's development and prosperity, and Japan cannot afford the price of continued contention with China," said the commentary.

The United States had to balance its alliance with Japan with the need to win cooperation with China, said the newspaper.

The overseas edition of the People's Daily carried an even stronger message that China would not dilute its claims to the disputed islands and saw little to fear from U.S. pressure.

"It would really be excessively naive ... to rely on other great powers as back-up to force China to submit," said the newspaper, which is a smaller offshoot of the main domestic edition of the paper.

Susan Shirk, a professor at the University of California, San Diego, said China's continued rancour appeared to be driven, at least partly, by a desire to please public opinion and powerful domestic constituencies.

"You can always count on the Japan relationship as the one where you can look tough, look strong, and satisfy the public," said Shirk, who served as U.S. Deputy Assistant Secretary of State responsible for China under former president Bill Clinton.

Japan has called for calm, although the government is under fire from its own domestic media for "caving in" to Chinese pressure by releasing the captain after China detained four Japanese citizens. Japan has denied a link.

Japanese officials have also been concerned about the economic fallout from the spat. Hiromasa Yonekura, head of Japan's biggest business lobby Keidanren, on Monday called for both sides to be cool-headed.

China became Japan's biggest trading partner last year and bilateral trade reached 12.6 trillion yen (94 billion pounds) in the January-June period, a jump of 34.5 percent over the same period last year, Japanese data shows.

Some Chinese customs offices have started stricter checks on shipments to and from Japan, causing delays, in what may be retaliation against Japan's recent detention of a Chinese fishing boat captain, the Mainichi newspaper in Japan said on Monday.

The latest development comes when there is concern that Beijing is holding back shipments of rare earth minerals vital for electronics and auto parts, although China has denied that there is a ban on exports to Japan.

"The Chinese government has not confirmed that there have been restrictions or limits," Takeaki Matsumoto, one of two deputies to Japan's foreign minister, told a news conference.

"But we are in a position to support Japanese businesses, so we will gather information and try to cooperate with relevant parties so we can respond to individual cases."

(Additional reporting by Chisa Fujioka, Yoko Nishikawa, Yoko Kubota in TOKYO; Editing by Nick Macfie)