http://www.reuters.com/article/2012/09/ ... 0H20120917
Panetta said the United States would stand by its security treaty obligations to Japan but not take sides in the row, and urged calm and restraint on both sides.
"It is in everybody's interest ... for Japan and China to maintain good relations and to find a way to avoid further escalation," he told reporters In Tokyo.
The overseas edition of the People's Daily, the main newspaper of the Chinese Communist Party, warned that Beijing could resort to economic retaliation if the dispute festers.
"How could it be that Japan wants another lost decade, and could even be prepared to go back by two decades?" asked a front-page editorial. China "has always been extremely cautious about playing the economic card", it said.
"But in struggles concerning territorial sovereignty, if Japan continues its provocations, then China will take up the battle."
Japanese Foreign Minister Koichiro Gemba said on Monday, after talks with Panetta, that Tokyo and Washington agreed the disputed islets were covered by the Japan-U.S. security treaty.
"I did not bring up the topic today, but it is mutually understood between Japan and the United States that (the islands) are covered by the treaty," he said after meeting U.S. Defense Secretary Leon Panetta in Tokyo.
http://www.crisishq.com/why-prepare/wor ... trodollar/