Reaction

Going forward, what seems likely to have a much more chilling effect - both psychological and practical - in Japan's economy and politics is uncertainty about the escalating dispute with China over the Diaoyu Islands.

Yoshinobu Yamamoto, honorary professor of international politics at the University of Tokyo, said the government's purchase of the Diaoyu Islands would make little material difference, other than to irritate Beijing.

"But I don't think it's a wise decision. It's as if Japan is picking a fight," he said.