Just when the 'China - threat' theories were being put to rest, an official outline in Japan has re - started the debate. In the revised National Defense Programme Outline that maps out Japan's defence policies for the period 2005-2015, China has been singled out as one of the two countries (the other being North Korea) that are 'potential threats' to Japanese security and integrity. This is not for the first time that Japan has come out with a defence plan. The National Defense Programme Outline was first formulated in 1976 and revised in 1996. However, for the first time, one of its neighbours has been named as a 'threat'. Although official Japanese explanations have played down the bogey of China threat as merely part of a 'scenario-building exercise', it seems Japan has taken serious notes of the changes taking place in its neighbourhood. It is worried about the increasing military expenditure by China and the growing teeth of the Chinese People's Liberation Army (PLA). Although economic development still has a central role in the Chinese grand strategy, China is sure to invest heavily into military infrastructure after 2020 without having any lateral impact over economic development. So even though China pretends it is modernizing the PLA with Taiwan in mind, the Japanese feel it could be their country as a long-term target. The policy shifts in the defense outline are nothing but a counterbalancing exercise by Japan vis-à-vis China.

The report has obviously generated enough heat and knee-jerk reaction in China. Officially, China has expressed 'strong dissatisfaction' to the Japanese government. What has irked the Chinese leadership is that the report has indicated the Chinese military modernization, more than any other reason, as the justification for a more proactive security policy and deeper involvement of the Japanese self-defence forces in international affairs. At a time, when China is busy selling its 'peaceful rise' theory, reports from Japan about various probabilities of a Chinese attack has brought a new low in Sino-Japanese relations.

In fact, Sino-Japanese relationship has never been good due to a number of irritants. The establishment of diplomatic relationship in 1972 and a peace treaty in 1978 notwithstanding, the bilateral relationship was always defined within the contours of historical animosity and mutual suspicion, apart from territorial disputes. However, while the Japanese have moved away and concentrated on business, the Chinese still remain aggrieved about 'past historical mistakes' by Japan. Within China, there is a state-supported image of Japan as an aggressor and an enemy. In its dealings with Japan, China gets swayed by 'emotional nationalism' instead of diplomacy and national interest. So, often we read about Chinese protests over small issues in Japan such as text book manipulations and visits by Japanese leaders to Yasukuni shrine. The Chinese continue to demand apology and monetary compensation from Japan for historical wrongs.

The publication of National Defence Outline Programme has once again raised debates in Chinese media about Japan's foreign policy intentions vis-à-vis China. There is an increasing realization that Japan is tired of being a soft power in world politics. The 'Cheque book' diplomacy is no longer popular in Japan and there are demands from a new generation of Japanese politicians that Japan play a political role in global politics commensurate with its economic status. On its part, Japan has been lobbying for a permanent Security Council seat and has shown leadership ambitions in the Asia-Pacific region which has unnerved the Chinese. They feel that by naming China as a potential threat, the Japanese have an excuse in the future to invest more in self-defence forces which is now limited to just one percent of Japan's GDP. Even this amount, which was around $ 45 billion in 2003, makes Japan the second largest defence spender in the world. The Chinese apprehend that Japan's decision to increase this share of military expenses beyond one percent of the GDP could have a spill-over effect in the region. In particular, China will be forced to invest more in PLA. Given the technological supremacy that Japan enjoys, no amount of monetary investments can help China overcome its security dilemma vis-à-vis Japan. Also, it could lead to a setback to China's developmental efforts.

Perhaps, China is reading too much in the Japanese defence plan. It is underestimating its own PLA modernization. According to various international agencies including SIPRI, China's defence expenditure is at least three times than its official figure. This figure of around $ 70 - 80 billion is more than the Japanese expenditure. A country like Japan, having great power ambitions, is bound to notice these developments in its neighbourhood.

In contemporary international politics, wars have become a risky venture. Moreover, economic stakes have a tendency to play down military threats. In the case of Sino-Japanese relations, there are huge economic stakes. Bilateral trade is touching $150 billion; Japan has pumped over $ 46 billion in FDI, apart from huge technological investments. Presently, the balance of trade is in favour of Japan by over $ 15 billion, but China has the potential to bridge this gap and gain a favourable position in bilateral trade. It would be in the interest of China, therefore, to stop reading between the lines and give up its historical approach to Japan policy.