Last month, the leaders of Asia’s two largest economies finally met in a bid to end a diplomatic deep freeze that has shut down political ties and even sparked talk of war.

But the body language for the ice-breaking photo op between China's president and Japan's prime minister was telling: Xi Jinping, silent as a Sphinx in front of a clearly uncomfortable Shinzo Abe.

The encounter follows months of backchannel negotiations to find a formula that would allow both sides to talk without losing face. Two former Japanese prime ministers visited Beijing to lay the groundwork.

Beijing demands that Tokyo acknowledge a dispute over the Senkaku/Diaoyu islands, a clump of rocks in the East China Sea that Japan owns but China and Taiwan claims.

It also wants Abe to stay away from Yasukuni Shrine, the controversial Tokyo memorial that enshrines Japan's war dead, including its second World War leaders. China was the biggest victim of Japan's rampage though Asia in the 1930s and '40s.

For its part, Japan has grown increasingly wary of China’s growing economic and military heft. Since Abe returned to power in late 2012, Japan has seen two consecutive rises in defence spending, and a record third request for 5.5 trillion yen, currently under deliberation.

Pacifist constitution

Earlier this year Abe relaxed Japan’s four-decade de facto ban on arms sales abroad. In July, he pushed through a “reinterpretation” of the nation’s 68-year-old pacifist constitution, allowing Japan to come to the aid of its US military ally.

Japan’s government will not say so outright, but these changes have largely been driven by its giant neighbour. China’s military budget has mushroomed 30 times over the last decade and its growing ability to project power across East Asia has alarmed Japanese conservatives.

The territorial dispute has become one possible flashpoint. For two years, since Japan effectively nationalised the islands, China has opted to challenge Japan’s ownership militarily instead of legally, helping to reinforce Abe’s argument that Beijing is throwing its weight around.

Last year China dubbed the Diaoyu a “core interest”, putting them in the same uncompromising diplomatic category as Taiwan and Tibet. The Japanese media has faithfully recorded a stream of incursions by Chinese surveillance ships and planes into Japanese waters.

Polls show more than half of Japanese now view China as a military threat. More worryingly, the percentage of Japanese who have a negative impression of China is at an all-time high of 93 per cent, according to an annual poll by Genron, a non-profit group working for detente. A similar poll in China recorded 87 per cent "negative feelings" toward Japan.

The threat of conflict was one factor pushing Abe and Xi to the negotiating table; another is economics. Japan has about 23,000 companies operating across China, employing about 10 million local workers. Before the island dispute, China was Japan’s largest trade partner.

Direct Japanese investment into China has plummeted by nearly half this year, however, and the number of Japanese living in China has fallen by more than 10 per cent since 2012, according to Japan’s foreign ministry. Japan, meanwhile, has slipped from China’s top trading partner to fifth.

Apology diplomacy

Cold economic calculus has kept the relationship on track so far but Abe has exacerbated the political problems lying beneath the surface. He is wedded to a brand of nationalist politics that rejects Japan’s “apology diplomacy” for its wartime misdeeds. Many of his cabinet are revisionists who deny Japanese war crimes in China and say Japan has been bullied into expressions of guilt and remorse.

The two starkly different views of history are very personal: During the war, Abe’s grandfather ran Japan’s puppet state of Manchukuo in northeast China and was later arrested as a war criminal, but subsequently freed. Xi’s father was a wartime Communist guerrilla who fought the Japanese army.

This month’s meeting will help smooth over these differences. Both sides have agreed to set up a crisis-management system to avoid military clashes at sea. Xi said strong ties and “stable and healthy growth” between the two nations benefit the world. Abe pledged to uphold Japan’s landmark 1995 apology for its colonial rule and wartime aggression.

But the formula used to bring both men together could come undone. Their acknowledgment that “different positions exist” on the island dispute was taken by China as a climbdown – Japan says its position has not changed. And Abe will be under political pressure next year – the 70th anniversary of the end of the second World War – to make a statement on the conflict that satisfies his nationalist supporters.

Any hint of revisionism will infuriate Beijing and set the diplomatic dial back to zero.