it is a strong ally of Japan.
Well-known Japanese firms have been targeted by protesters, with car makers Toyota Motor Corp and Honda Motor Co halting some operations after attacks on their outlets.
Other Japanese companies -- from Mazda and Mitsubishi Motors to Panasonic and Fast Retailing -- also shuttered plants and stores in China, sending Japanese share prices falling and prompting a warning from credit rating agency Fitch that the situation could hurt some auto and tech firms' creditworthiness.
Hitachi Construction Machinery recalled 25 Japanese workers back to Japan because of the unrest.
Mutsuko Takebayashi, a Japanese expatriate housewife living in Shanghai, said she planned to fly home with her family.
It's possible that Japanese companies will start evacuating families back home and if that happens it'll be too late to book tickets. That's why I'm going back today, she said.
Japanese restaurants, a common target of protesters, barred their doors while many Japanese expatriates stayed home, afraid that Tuesday's anniversary of Japan's 1931 occupation of parts of mainland China could lead to outbreaks of violence.
Tuesday's brief landing by two Japanese nationals on one of the disputed islands, reported by Japan's coast guard, has raised fears of a direct clash in an area being patrolled by ships from both nations.
The activists briefly landed on one of the islands, having paddled up to it in a rubber raft and swum ashore before returning to the boat, Japanese broadcaster NHK said.
A flotilla of around 1,000 Chinese fishing boats is also reported by Chinese and Japanese media to be heading to the area, which contains potentially large gas reserves. In 2010, a bilateral crisis over the islands erupted after a fishing boat collided with a Japanese Coast Guard vessel.
The Japanese government has set up an information-gathering operation to monitor the movements of the Chinese fishing boats.
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The long-standing territorial dispute erupted last week when the Japanese government decided to nationalise some of the islands, buying them from a private Japanese owner.
Political analysts say China also upped the stakes last week when it announced precise boundaries for waters it claims around the islands, a