Japanese Prime Minister Sanae Takaichi finally appears to be backing down amid recent escalating punitive measures imposed on Tokyo by China in the areas of trade, diplomacy, and tourism. Beijing has been dialing up the pressure for weeks, after the new prime minister nearly a month ago told Japanese parliament an attack on Taiwan by the People’s Liberation Army could pose a “survival-threatening situation” for which Tokyo would be justified in intervening militarily. 

Feeling immense pressure and blowback from the provocative prior comments, Takaichi on Wednesday while again addressing parliament reverted back to providing clarity that Japan’s official position on the self-ruled island remains unchanged. “The Japanese government’s basic position regarding Taiwan remains as stated in the 1972 Japan-China Joint Communique, and there has been no change to this position,” Takaichi said.

Prime Minister Sanae Takaichi, pool image/NY Times

The historic 1972 communique spells out that “the government of the People’s Republic of China reiterates that Taiwan is an inalienable part of the territory of the People’s Republic of China” before affirming that the Japanese government “fully understands and respects this stand.”

The communique further states that Japan “firmly maintains its stand under Article 8 of the Potsdam Declaration.” China also often cites the Cairo Declaration of November 1943 as having the legal status of a binding treaty. The Cairo Declaration requires that Japan return any territory seized from China during war. The two documents formed the basis of the 20th century post-war WW2 era normalization of ties between the two historic enemies and rivals.

Since last month, China’s Foreign Ministry has been insisting on a full retraction and apology from PM Takaichi over her ‘defend Taiwan’ remarks – which drew a sharp rebuke from ministry spokesperson Mao Ning. “Stop crossing the line and playing with fire, retract the wrongful remarks and deeds and honor its commitments to China with real action,” Ning said at the time. 

On Monday ministry spokesperson Lin Jian repeated the demand, urging Japan to “learn the lessons of history, do soul searching, take seriously what it has heard from the Chinese side, simply retract the erroneous remarks as it should and take practical steps to honor its political commitments to China.” Takaichi’s fresh remarks recognizing the status quo on Taiwan, which was spurred by questions from lawmakers, could soften the crisis – yet Beijing is likely to still keep up the pressure given her words stopped short of a formal retraction and apology.

“President Xi is trying to stir up trouble wherever he can and intimidate countries like Japan,” Senator John Cornyn (R-TX) told ZeroHedge on Wednesday, calling Japan an important US ally. He described that he views the US stance of Strategic Ambiguity on Taiwan as “not necessarily a bad thing” because “we want President Xi to think not just once or not just twice but many times before he pulls the trigger which unfortunately I think is preparing to do.”

Sen. Josh Hawley (R-MO) also responded on the question of allowing China to believe that it owns Taiwan. “We shouldn’t do that,” he told us. “Taiwan has a right to be independent, they are a free and independent nation, they should remain that way. Whether we given them security guarantees if a different question.”

“We should tell them ‘you don’t have any right to conquer them’. It plays into China’s hands to treat the Taiwanese as if they’re owned by China,” Hawley emphasized, declaring further that “we ought to be clear about it.“

Getty Images/Fox News

China of course remains Japan’s biggest trading partner, and has already taken harsh retaliatory measures including the curbing of Japanese seafood imports, the cancellation of films and concerts – as well as cultural exchange programs, as well as the drastic move of urging Chinese citizens to avoid all travel to Japan.

In addition to Japan’s vital seafood industry being impacted, the restaurant scene is also feeling the fallout:

Diners once had to book weeks in advance to secure a table at Toya, a popular Japanese restaurant in Beijing.

But business has taken a sharp turn, with more than 60 reservations cancelled since mid-November, said owner Kazuyuki Tanioka, who has served omakase menus in the Chinese capital for over a decade.

And the film industry, per the same report: 

The spat has also led to the postponement of Japanese film releases in China, the abrupt cancellation of concerts by Japanese musicians and the suspension of official exchanges.

A frequent traveller to Japan, Yan Jun, faced a dilemma when China advised its citizens to avoid visiting Japan. Chinese airlines proceeded to cut hundreds of Japan-bound flights this month.

China’s PLA Navy and Coast Guard have also increased their presence near Taiwan and in and near disputed islands and waters. The latest incident involving Japanese and Chinese vessels happened near a group of geopolitically sensitive islands in the East China Sea on Tuesday, as we documented previously.

Chinese state media is also meanwhile highlighting that Takaichi faces backlash from within Japan as well. “Several Japanese lawmakers and prominent scholars gathered Tuesday evening at the Members’ Office Building of the House of Councillors to urge Prime Minister Sanae Takaichi to retract her recent erroneous remarks on Taiwan,” Xinhua writes Wednesday.

“The meeting was held under the theme of demanding Takaichi withdraw her remarks linking a ‘survival-threatening situation’ for Japan to the Taiwan question and return to the starting point of the normalization of Japan-China relations,” the report notes. If Takaichi does in the end back down, offering the requested retraction and apology, it will be seen in the region as a huge diplomatic ‘win’ for China after flexing considerable economic might. 

Liam Cosgrove contributed to this report.

Almost 20 years ago, when the Lehman/AIG collapse and the ensuing global financial crisis sent the world into a brief but acute depression, it was China’s massive debt-fueled growth dynamo that kick started the world economy and lifted the globe out of what would have been a lost decade – if not worse. The one trade off to this historic kickstart: China ended up doubling its total debt, which then continued growing at an exponential rate until the covid collapse sent China’s property sector – the biggest asset of its massive middle class – into a tailspin, and sparked a historic economic crisis. Only this time, because its total debt was already at 350% of GDP, Beijing no longer could wave a magic debt wand, inject a few trillions in credit, and make it all go away. Instead, the housing market has been in steady decline for the past 5 years and if anything, the decline has accelerated now that China’s Vanke – the last remaining state-backed property giant – is on the verge of collapse.

Unfortunately for China, which has done an admirable job of shoving all its economic woes under the rug while pretending it is growing at a immutable 5% year in and out, it’s about to get worse.

As Japan’s Nikkei reports, China’s local government debt continues to balloon as the prolonged, 5-year-long and counting, real estate slump has led to slumping income from property sales, pushing local government bond issuance for the year to a record high.

The total owed by local governments and the local government financing vehicles (LGFV) that fund their projects now sits at an estimated 134 trillion yuan ($18.9 trillion), which suggests that total public debt to GDP is far above 200%… and rising (by comparison in the US it is 100%… and rising). Add another 200% in private sector debt, and you can see why China debt problem is even bigger than that of Japan. It’s also what, according to Rabobank’s Michael Every, underlines China’s structural necessity to maintain capital controls and a vast, neo-mercantilist trade surplus (i.e., China will continue dumping goods and exporting deflation as the alternative means game over).

China’real estate collapse has left local governments reliant on debt due to being unable to sell off property. 

And while China’s record low interest rates may cover up and put the problem off temporarily, it will also draw out deflation further, further depressing growth, leading to even more debt, and so on as the deflationary debt vortex expands.

“We’ve set aside 500 billion yuan for local governments,” said China’s Finance Ministry said in an October notice, explaining that it had approved additional debt expansion.

The funds are to be used to reduce local government debt and unpaid bills, as well as for investment projects.

“Right now, local governments are focusing on issuing bonds, placing them quickly and realizing their benefits as soon as possible,” said Li Dawei, who leads the ministry’s new debt management department.

Issuance of local government bonds this year totaled over 10 trillion yuan as of the end of last month. This exceeds the total for all of last year – 9.7 trillion yuan – and has already set a record for the largest amount in a single year. The outstanding balance of local government bonds has reached 54 trillion yuan.

Multiple factors are behind the increase. The biggest one is the drop in local government revenues resulting from the neverending real estate market slump. The value of property sold by local governments in January-October totaled just under 2.5 trillion yuan. In 2021, that value was over 8.7 trillion yuan for the full year.

“Over 10% of properties to be sold received no bids because there were no buyers,” said You Zipei, an analyst at Zhongtai International Securities. You says the market is adjusting further, and expects the total value of property sales for 2025 to be about 3 trillion yuan, a more than 5 trillion yuan decline from the peak.

Another reason local governments are issuing more bonds is hidden debt. Hidden debt refers to money raised through means such as corporate bonds issued by local government financing vehicles, or investment companies owned by local governments.

There is no precise data on the balances of these LGFV debts. The total of all debt with interest issued by roughly 4,000 LGFVs sat at 87 trillion yuan at the end of last year, according to Chinese data provider DZH. Adding this to the 47 trillion yuan in local government bonds brings the total to 134 trillion yuan, or just under $19 trillion.

The International Monetary Fund estimated LGFV debt in China at 65 trillion yuan in 2024. While there are a range of estimates, the general view is that local governments in China have between 60 trillion yuan and 80 trillion yuan in off balance-sheet debt.

A company can survive even with large debts as long as it is making money, but LGFVs have low profitability, with nearly 10% seeing losses. Only 3% of LGFVs have a return on equity over 4%.

Sure enough, while total net profit for LGFVs for the year ended December 2024 was around 550 billion yuan, they received double that, or more than 1 trillion yuan, in subsidies. In other words, without constant funding from Beijing, China’s regional economies would implode.

This means that nearly 50% of those LGFVs were in the red when subsidies are excluded. Considering the projects they fund are low profitability infrastructure projects, these entities will face a long road to paying down their debts.

In spite of their massive debts, LGFVs can continue to operate by banking on implicit guarantees from the government and low interest rates resulting from prolonged deflation. Meanwhile, the debt hole is only getting bigger: Xi Jinping’s government last fall approved the issuance of an additional 10 trillion yuan in local government bonds to transfer LGFV debt to local governments. The government has a strong desire to avoid a financial crisis brought on by LGFVs, or anyone else for that matter as economic collapse in the middle of a trade war with Trump would be catastrophic for Xi’s reputation.

The average yield on corporate bonds issued by LGFVs under the city of Beijing this year is 2.1%, down 1.4 percentage points from 2021. The drop is comparable to that seen for national government bonds. The finances of local governments are being supported by monetary easing on the part of the People’s Bank of China in an effort to prop up the sluggish economy.

While deflation does help kick the debt problem down the road, it also makes the issue ultimately harder – if not impossible absent a devastating crisis – to solve.

The Domar condition is one indicator for determining fiscal stability. The basic idea is that fiscal sustainability is unlikely to be compromised as long as the nominal rate of economic growth exceeds the nominal interest rate.

“With China’s nominal growth rate headed downward to the 3% range, and its nominal interest rate is just under 2%, the gap is closing,” said Yusuke Miura at think tank NLI Research Institute. And unless the PBOC pulls a Japan and unleashes Negative Rates thanks to massive QE, the countdown to China’s next mega crisis is on.

The majority of China’s government bonds are denominated in yuan. With the country’s large current account surplus, local government bonds are not likely to run out of buyers in the near future. Yet China’s government is well aware that its fiscal situation is getting worse. It has started refraining from making big outlays and there is a growing possibility that deflation due to slack demand will drag on.

Last week, Secretary of Homeland Security Kristi Noem revealed that Rahmanullah Lakanwal, the man accused of shooting two National Guard troops in Washington, DC, last week, killing one and leaving the other severely wounded, was likely radicalized in the United States after being allowed in this country under the Biden Administration’s Operation Allies Welcome. But new information revealed the chilling possibility that Taliban blackmail may have driven Lakanwal to gun down National Guard troops, which raises troubling questions about threats no security screening can detect.

Lakanwal, 29, stands accused of first-degree murder after allegedly shooting Army Spc. Sarah Beckstrom, 20, and Staff Sgt. Andrew Wolfe, 24, in an ambush-style attack the day before Thanksgiving blocks from the White House. Beckstrom died from her injuries the following day, while Wolfe remains in critical condition. Federal intelligence agencies are now investigating whether a Taliban “hit squad” threatened to murder Lakanwal’s family in Afghanistan if he refused to carry out the assault, which would explain why a man with no criminal record or history of extremism would drive from Washington state, armed only with a .357-caliber revolver, to engage heavily armed military personnel.

Lakanwal’s background makes the alleged attack even more perplexing. He was a GPS tracking specialist with the Afghan Scorpion Forces and worked closely with the CIA in Afghanistan. He supported U.S. forces during Joe Biden’s botched withdrawal in August 2021 and managed to board one of the last flights out, escaping potential retaliation for his cooperation. 

“One line of inquiry they are seriously pursuing, according to sources with knowledge of the investigation, is that Lakanwal was made an offer he could not refuse. Either he accepted the mission, or his family in Afghanistan would be beaten, murdered, and possibly beheaded,” reports The Daily Beast. “Lakanwal was a member of the Afghan Scorpion Forces working closely with the CIA as a GPS tracking specialist. He helped the U.S. military escape from Kabul in the shambolic retreat from Afghanistan in August 2021. Between August 14 and 30, more than 123,000 people were airlifted from Kabul Airport. The Afghan fighter joined one of the last flights because he served the United States and due to the danger he would be in if he were left behind.”

It is believed that about 700 members of the Scorpion Forces are still detained in Afghanistan due to their collaboration with the U.S. and its allies, and the Taliban hasn’t forgotten those who helped the West. A military unit called Yarmouk 60 has spent the past five years tracking down and killing Afghans who collaborated with Western forces. In a horrifying example of this retaliation, an Afghan special forces fighter who escaped to Germany saw his family targeted by Yarmouk 60 earlier this year. According to a source, the Taliban “killed his wife and father and four of his children, including two little girls who were beheaded.” 

An intelligence source told The Daily Beast that “It is by no means our only line of inquiry,” but added that “most of them have families back home, and if the Taliban cannot get to them, they are making it very clear that they will go after their families.” Sources with knowledge of the investigation suggest Lakanwal may have been given a stark choice: accept the mission or watch his family in Afghanistan be “beaten, murdered, and possibly beheaded.”

The blackmail scenario, if confirmed, represents a national security nightmare that goes far beyond typical vetting failures. It means that Afghan refugees who risked everything to help America defeat terrorist elements could be weaponized through threats against their families still trapped under Taliban rule. Recent reports indicate that more than 5,000 Afghans admitted under the Biden administration have been flagged as national security risks. If the Taliban can activate refugees through family-based coercion, even those with no terrorist ties become potential threats—a vulnerability nearly impossible to prevent through standard security protocols.

Authored by Savannah Hulsey Pointer via The Epoch Times (emphasis ours),

Department of Justice (DOJ) officials are attempting to crack down on an online predator network known as “764,” as online exploitation of vulnerable groups increases.

In this photo illustration, the TikTok app is seen on a phone in New York City on March 13, 2024. Michael M. Santiago/Getty Images

This group has proven to be dangerous for many victims, including minors, who are targeted and threatened through forums and gaming platforms. The FBI announced on Feb. 20 that it has prioritized investigations related to the group.

The National Center for Missing and Exploited Children said the group is “producing some of the most sadistic online enticement reports” it has ever seen.

Here’s what we know about the 764 network and the government’s crackdown.

What the Network Does

In March, the FBI warned of a “sharp increase” in activity from 764 and similar networks.

According to the bureau, the networks “methodically target and exploit minors” and others. The groups use threats, blackmail, and other forms of manipulation to coerce or extort victims.

The primary mode of leverage is to force the individual to produce and share acts of self-harm, animal cruelty, explicit sexual acts, and even suicide. The footage can then be circulated among members of the network, which allows for continued extortion and control of victims.

The group has been known to prey on victims as young as 9 years old.

The DOJ refers to 764 as “a network of nihilistic violent extremists who engage in criminal conduct in the United States and abroad, seeking to destroy civilized society through the corruption and exploitation of vulnerable populations.”

The mother of a child exploited by a 764 group member told the National Center for Missing and Exploited Children that the individual pushed her daughter to cut the member’s screen name into her arm with a razor blade.

The individual then told her she was a “good girl” and that he or she loved her. To the mother’s surprise, her daughter responded, “I love you too!”

“These guys are very scary,” the mother told the organization. “Just the power they have over my daughter is mind blowing. Please help!”

Families have also alleged that group members have threatened to harm the relatives of the individuals they target if the victims do not cooperate with the group’s demands.

The Network’s Goal

The 764 network emerged in 2021 from the “Com Network,” which was involved in sexual extortion and online child sexual abuse material distribution, according to the Institute for Strategic Dialogue, a global human rights organization.

The network was started in 2021 by then-15-year-old Texas resident Bradley Cadenhead, who said that the group was cofounded by a friend he met through the game Minecraft, although the friend has not been identified, according to the institute.

The group was named “764” after Cadenhead’s hometown ZIP code.

According to the FBI, some of the violent actors in the online network are “motivated by a desire to cause fear and chaos through their criminal conduct.”

The agency also said that the motivations of many of the exploitative actors are highly individualized and that “some threat actors may be engaging in criminal activity solely for sexual gratification, social status, or a sense of belonging.”

The DOJ asserts that many members of 764 seek to desensitize young people to violence and destroy societal norms surrounding violence.

“They normalize the possession, production, and sharing of explicit [child sexual abuse material] and gore material to corrupt and groom their victims toward future violence, gain notoriety among other members of the network, and spread fear for the purpose of accelerating chaos under the 764 ideology with an aim toward the disruption of society,” the DOJ stated.

The agency has also stated its belief that the 764 network’s goals include social unrest and “the downfall of the current world order, including the United States Government.”

Government Crackdown

FBI Director Kash Patel and Deputy Director Dan Bongino said on Nov. 20 that their bureau is committed to cracking down on 764.

“This FBI is fully engaged in taking down the heinous ‘764’ network that targets America’s children online,” Patel said in a statement.

The director went on to say that more than 300 investigations are underway across the United States and that the agency is “not stopping.”

Bongino announced that the FBI’s Baltimore field office arrested an individual accused of targeting at least five minors: “This [FBI] will keep working day and night to destroy this network. It is a top priority. We are making progress, but the work isn’t done.”

Arizona authorities in October announced charges against an alleged affiliate of the 764 network. The individual, 21-year-old Baron Cain Martin, was known online as “Convict” and other names.

He is accused of targeting at least eight children between the ages of 11 and 15 and of child sexual abuse material production and distribution, cyberstalking, “animal crushing” content, and conspiring to provide material support to terrorists.

“This man’s alleged crimes are unthinkably depraved and reflect the horrific danger of 764—if convicted, he will face severe consequences as we work to dismantle this evil network,” Attorney General Pam Bondi said in a statement.

Martin is also accused of writing and posting a guide to train others on how to identify, groom, and extort victims of their own.

Patel also commented on Martin’s charges, saying in a statement, “The FBI will not stop until we find those who perpetrate these horrific crimes that prey on the most vulnerable members of our communities.”

More arrests were made in April when two citizens of the United States connected with 764 residing in Thessaloniki, Greece, and High Point, North Carolina, were accused of grooming, manipulating, and extorting minors.

How to Keep Your Family Safe

Cadenhead was arrested in 2021 and later sentenced to 80 years in prison for the creation and distribution of child sexual abuse materials. But that has done nothing to slow the group’s growth.

In his Nov. 20 statement, Patel encouraged parents to monitor children’s internet activity and limit the opportunities for online predators to reach children.

The 764 network began its activities on the messaging app Kik but also uses online platforms such as Discord, Roblox, Snapchat, Instagram, and Telegram, according to the Institute for Strategic Dialogue.

The National Center for Missing and Exploited Children and the FBI encourage parents and caregivers to also look for cuts, bruises, or other wounds on their children in unusual patterns. Another cause for concern is any sudden change in behavior or any attempt by a child to cover him- or herself with excessive clothing.

Parents are also encouraged to discuss with their children the potential dangers of contact with strangers and sharing personal information and photos.

Bondi said in her statement, “I urge parents to remain vigilant about the threats their children face online.”