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The worsening Sino-Japanese relations threaten East Asian regional stability and have serious implications for Canadian interests in promoting peace, economic prosperity and good governance. Despite growing trade, investment, and other socio-economic ties between China and Japan since 1972 when the two countries normalized diplomatic relations, the level of mutual understanding and trust remains low today. The recent spats over territorial disputes, historical issues, military buildups, and alternative approaches to developing regional security and economic architecture pit the two Asian powers in a dangerous rivalry. There are many reasons behind the ambivalence of the bilateral relationship, including the two countries? changing domestic political dynamics as new generations of leadership take up the rein and as policy debates and processes are increasingly influenced by public opinions and growing nationalist sentiments; divergent views of and interests in the future security architecture in East Asia and the role of military alliances and suspicions in both capitals of each other?s intentions and military buildup; and perceived and actual competition for the region?s political and economic leadership with China?s continuing growth and Japan?s recent recovery. Complicating this changing relationship is the lack of mutual trust, which in turn is further fed by the legacy of the past, territorial disputes, and domestic developments. Indeed, a serious challenge to the leaderships in both capitals is that never in history have both countries been powerful at the same time and this raises the question of how this potential competition for regional primacy is to be managed. ..PAT.-Unpublished Manuscript [ABSTRACT FROM AUTHOR]