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We may be on the verge of a war.

Unlikely.If China moves its navy,in numbers,into the disputed area the Japanese will know that it's "game over".The only effective response the Japanese might have is an economic one and it appears that they're using it.Now it's time for the US and Europe,China's two other economic lifelines,to step up and say "no additional imports from China".After *that* happens the Chicoms have nowhere to send the,cheap,worthless garbage they're now sending to Japan.

Just the opposite. At sea the JMSDF could easily hold those islands. Japan has some very quiet diesel boats that could make it impossible for China to keep major naval units in the area. Japan's Atago class DDGs are upgunned versions of our Arleigh Burke class destroyers and the four Kongo class DDGs are also first rank warships. Those are backed by two older but still very good DDGs and 30 modern frigates (Japan doesn't use the word frigate so they are referred to as destroyers in their order of battle). In summary 6 world beaters and 32 Backups.

China has the numbers but Japan has a massive qualitative advantage. Off the cost of China that would be advantage China, but out in the deep blue sea much of China's strength just doesn't have the ability to stay at sea.

For deep blue power projection the PLAN may or may not have the Varyag. She has gone to sea and operated fighters once. What use a carrier with a virtually untrained air wing would be is debatable.

For DDGs and FFG China has 12 Type 51 and Type 52 class that while not up to western standards are still very good. They also have 15 Soviet Era Destroyers that could be useful if they want to go with a battle of the first salvo. They have lots of tubes for big cruise missiles, but their defensive systems are dated. They also have 17 Type 54 and 54a frigates. Similar to our Perry class. So China would have less than a two to one advantage in hulls, but would face better ships, with more experienced crews.

On the economic front Japan his hopeless. Japan is decades into an economic collapse that was made worse by the Tsunami and the cost of the Fukushima cleanup. Their economy simply can't take the shock of a full trade war with China.