18 September 2012 Last updated at 02:43 ET
The demonstrations against Japan have turned violent in some places
Shares of some Japanese firms that have suspended part of their operations in China in the wake of the anti-Japan protests have fallen in Tokyo.
Nissan Motors shares dropped 5%, Uniqlo-owner Fast Retailing fell 7% and Honda Motors was down by 2.5%.
The protests followed Japan's purchase of islands in the East China Sea, over which China claims sovereignty.
Though the firms have suspended operations temporarily, there are fears the protest may escalate further.
"This is a major concern. The worry is that if it is not dealt with properly and fast enough, the situation may get out of hand," Martin Schulz of Fujitsu Research Institute told the BBC.
"And any such development will hurt Japanese firms even further."
More suspensionsOn Tuesday, Japanese supermarket operator Aeon said it had closed 30 of its stores in China following the protests.
Car maker Toyota also suspended some production, though the group did not give any details as to which of its operations were affected, while electronics giant Sony closed two of its seven factories in the country.
This followed similar moves by other Japanese firms on Monday.
Nissan Motors suspended operations at two of its factories until 18 September and said it was monitoring the situation closely.
Panasonic has said that its plant in Qingdao would also remain shut until 18 September, while Canon has temporarily suspended operations at three sites.
Canon's affected factories are in the south-east of the country at Zhuhai and Zhongshan in the province of Guangdong and at Suzhou, near Shanghai.
Continue reading the main story[h=2]Japanese companies in China[/h]
The fear is that if the demonstrations escalate further, these firms, and other Japanese companies present in China, may be forced to curb operations for a longer time.
Bigger impactThere are also concerns that protests, triggered over the weekend, may derail plans by the Japanese companies looking to expand in China.
China is known for being a low cost manufacturing base and several Japanese manufacturers have set up factories there.
These operations have become even more important in recent times amid a strong Japanese yen, that has made goods produced in Japan more expensive for foreign buyers.
Analysts said, the anti-Japan protests may result in some Japanese firms being forced to rethink their strategy.
A recent rise in labour costs in China, may also play a part in prompting them to look to investing in other countries in the region.
However, they warned that such a move may not be an easy one for the firms.
"You get economies of scale in China, which may not be the case in other countries in the region," said Mr Schulz of Fujitsu Research Institute.
At the same time, there are also concerns that the anti-Japan sentiment in China may hurt sales of Japanese goods in the country, further hurting Japanese manufacturers.
Shares of some Japanese firms that have suspended part of their operations in China in the wake of the anti-Japan protests have fallen in Tokyo.
Nissan Motors shares dropped 5%, Uniqlo-owner Fast Retailing fell 7% and Honda Motors was down by 2.5%.
The protests followed Japan's purchase of islands in the East China Sea, over which China claims sovereignty.
Though the firms have suspended operations temporarily, there are fears the protest may escalate further.
"This is a major concern. The worry is that if it is not dealt with properly and fast enough, the situation may get out of hand," Martin Schulz of Fujitsu Research Institute told the BBC.
"And any such development will hurt Japanese firms even further."
More suspensionsOn Tuesday, Japanese supermarket operator Aeon said it had closed 30 of its stores in China following the protests.
Car maker Toyota also suspended some production, though the group did not give any details as to which of its operations were affected, while electronics giant Sony closed two of its seven factories in the country.
This followed similar moves by other Japanese firms on Monday.
Nissan Motors suspended operations at two of its factories until 18 September and said it was monitoring the situation closely.
Panasonic has said that its plant in Qingdao would also remain shut until 18 September, while Canon has temporarily suspended operations at three sites.
Canon's affected factories are in the south-east of the country at Zhuhai and Zhongshan in the province of Guangdong and at Suzhou, near Shanghai.
Continue reading the main story[h=2]Japanese companies in China[/h]
- Panasonic - shut factory in Qingdao
- Canon - suspended operations at three plants
- Honda and Nissan - stopped production for two days
- Mazda - stopped production at Nanjing factory for four days
- Toyota - suspended some production
- Sony - closed two of its seven plants and is discouraging non-essential travel to China
- Seven & I Holdings - closed 13 supermarkets and 198 convenience stores
The fear is that if the demonstrations escalate further, these firms, and other Japanese companies present in China, may be forced to curb operations for a longer time.
Bigger impactThere are also concerns that protests, triggered over the weekend, may derail plans by the Japanese companies looking to expand in China.
China is known for being a low cost manufacturing base and several Japanese manufacturers have set up factories there.
These operations have become even more important in recent times amid a strong Japanese yen, that has made goods produced in Japan more expensive for foreign buyers.
Analysts said, the anti-Japan protests may result in some Japanese firms being forced to rethink their strategy.
A recent rise in labour costs in China, may also play a part in prompting them to look to investing in other countries in the region.
However, they warned that such a move may not be an easy one for the firms.
"You get economies of scale in China, which may not be the case in other countries in the region," said Mr Schulz of Fujitsu Research Institute.
At the same time, there are also concerns that the anti-Japan sentiment in China may hurt sales of Japanese goods in the country, further hurting Japanese manufacturers.