Nationalist Entrepreneurship Capitalizes on Bilateral Tensions

The current crisis creates opportunities for what might be termed “nationalist entrepreneurship” where businesses and individuals capitalize on bilateral tensions by positioning products, services, or content as alternatives to offerings from the other country, potentially creating economic constituencies with interests in sustained tensions rather than diplomatic resolution. While most businesses suffer from bilateral crisis, some actors may benefit from opportunities created by disrupted economic relationships and heightened nationalist sentiment.
In China, businesses offering domestic alternatives to Japanese products or services may experience increased demand as travel advisories and informal boycotts redirect consumer spending. Entertainment companies producing content that substitutes for postponed Japanese films, tourism destinations competing with Japan for Chinese visitors, and various other businesses may gain market share during crisis periods, creating economic interests in sustained tensions that maintain their competitive advantages over Japanese alternatives.
Similarly, Japanese businesses may benefit from crisis dynamics through enhanced domestic consumption replacing Chinese imports, tourism operators capturing domestic travelers who might otherwise visit China, or various other substitution effects. While aggregate economic impacts are negative—economist Takahide Kiuchi projects $11.5 billion in tourism losses from over 8 million Chinese visitors representing 23% of all arrivals—the distribution of costs and benefits is uneven, with some actors experiencing gains that create economic interests in sustained tensions.
The nationalist entrepreneurship dimension complicates crisis resolution because it creates constituencies benefiting from continued confrontation. While bilateral cooperation serves overall economic interests, specific actors who have gained market share or business opportunities during crisis periods may resist diplomatic normalization that would restore competition from the other country. These actors may use nationalist rhetoric to frame their economic interests as patriotic positions, making it politically difficult to challenge their opposition to diplomatic compromise.
Political leaders must navigate competing domestic constituencies where tourism operators, cultural enterprises, and others suffering from crisis seek diplomatic resolution, while nationalist entrepreneurs benefiting from tensions may resist normalization. The political economy of bilateral crisis is complex, with winners and losers creating cross-cutting pressures on diplomatic policy that may not align simply with aggregate national economic interests.
The phenomenon of nationalist entrepreneurship may also create longer-term market structure changes that persist beyond immediate crisis. If businesses successfully establish market positions during crisis periods by offering domestic alternatives to products or services from the other country, they may maintain those positions even after diplomatic relations normalize, having used the crisis period to build brand recognition, customer loyalty, and operational capabilities that allow them to compete effectively even when bilateral restrictions ease.
Prime Minister Sanae Takaichi faces pressures from both crisis losers seeking diplomatic resolution and potentially from nationalist entrepreneurs who benefit from sustained tensions. Professor Liu Jiangyong indicates countermeasures will be rolled out gradually while Sheila A. Smith notes domestic political constraints make compromise difficult, with these constraints potentially including opposition from nationalist entrepreneurs who have economic interests in sustained confrontation. Small businesses like Rie Takeda’s tearoom suffering mass cancellations represent crisis losers, but nationalist entrepreneurs represent the less-visible winners whose economic interests may complicate diplomatic resolution by creating domestic constituencies benefiting from bilateral tensions whose voices contribute to domestic political constraints identified by international relations experts.