The rancour between Japan and China was on public display at the World Economic Forum in Davos, Switzerland when Japanese Prime Minister Shinzo Abe gave his keynote speech to the gathering of billionaires, bankers, CEOs, and political leaders on Wednesday.

After expounding on his “Abenomics” pro-market restructuring agenda, Abe spent the second half of his speech making barely-veiled jabs at China that were calculated to further inflame tensions.

Abe began by declaring that “freedom of movement” was of particular importance—a reference to the dangerous dispute that emerged last month over China’s declaration of an Air Defence Identification Zone in the East China Sea, including the disputed islets known as Senkaku in Japan and Diaoyu in China.

The US, followed by Japan, immediately flew war planes into the zone unannounced, challenging Chinese authority and sharply escalating tensions. As China scrambled its own fighters in response, the danger emerged of a clash precipitated by a mistake or miscalculation on either side.

Referring to the Senkaku/Diaoyu islands, Abe repeated his adage that disputes should be resolved through dialogue and the rule of law, not through force and coercion. In fact, his government refuses to even recognise that there is a dispute over the rocky outcrops and has stepped up military measures in the area, raising the risk of a military clash.

Again pointing to China, Abe proclaimed the need to “restrain military expansion in Asia, which could otherwise go unchecked.” He called for military budgets to be made “completely transparent”—a criticism repeatedly made by the US and its allies over China’s military spending.

While repeatedly declaring his commitment to peace, Abe last year announced the first increase in the Japanese military budget in a decade. His government continued to shift the strategic focus of the Japanese military to “island defence” and Japan’s southern island chain adjacent to the Chinese mainland.

Japan’s defence expansion has been encouraged and backed by the Obama administration, as part of its “pivot to Asia” that includes strengthening of alliances and partnerships throughout the region aimed against China.

Making clear the dangers of war were real, Abe warned his audience: “If peace and stability were shaken in Asia, the knock-on effect for the entire world would be enormous.”

Asked by the chair of the session, Abe defended his visit in December to the notorious Yasukuni war shrine—a hated symbol of Japanese militarism in the 1930s and 1940s, where many “Class A” Japanese war criminals are buried. Abe claimed he was simply “praying for the souls of the departed,” which should be “something quite natural for a leader of any country in the world.”

While Abe did not name China in the course of his speech, the target of his remarks was unmistakable.

In another Davos session, Chinese academic Wu Xinbo responded by calling Abe a “troublemaker”, likening him to North Korean leader Kim Jong-un. “Political relations between our two countries will remain very cool, even frozen for the remaining years of Abe in Japan,” he warned.

In a less public forum at Davos with international journalists, Abe was more explicit. Asked by Financial Times journalist Gideon Rachman if war with China was “conceivable”, the Japanese prime minister did not rule it out. Instead, he compared the current tensions between China and Japan to the rivalry between Britain and Germany in the years before the World War I, saying that it was a “similar situation”.

While various commentators have made the same comparison, such remarks carry added significance coming from Japan’s prime minister. Abe reinforced the point by declaring that China’s increase in military spending was a major source of instability in the region.

As reported in Rachman’s blog, Abe noted that, “Britain and Germany—like China and Japan—had a strong trading relationship. But in 1914, this had not prevented strategic tensions leading to the outbreak of conflict.” He warned of the danger of “some conflict or dispute arising out the blue, on an ad hoc level… or inadvertently”—a reference to the killing of the Austrian archduke in 1914 that sparked war.

Abe offered no suggestion as to how conflict could be avoided, other than a half-hearted proposal for a “military-force level communications channel” between Beijing and Tokyo. “Unfortunately we don’t have a clear and explicit roadmap,” he said, adding later than Japan would “very much like to strengthen our military relationship with the US.”

This last remark highlights the role of the Obama administration is stoking up tensions throughout the region. Its “pivot to Asia” has encouraged allies as Japan and the Philippines to take a far more aggressive stance in their maritime quarrels with China. Four years ago, the dispute over the Senkaku/Diaoyu islands barely registered in international politics. Today it has become a dangerous flashpoint for war in Asia.

Abe’s speech is part of an escalating propaganda war between Japan and China. Following Abe’s visit to the Yasukuni Shrine on December 26, Chinese and Japanese ambassadors have engaged in embittered exchanges in the newspapers in at least a dozen countries, including the United States, Britain, Australia and New Zealand.

In Britain, the exchange took the bizarre form of likening the other country to Lord Voldemort—the ultimate incarnation of evil the Harry Potter children’s novels—and accusing it of militarism and aggression.

Like the Abe government, the Chinese regime has seized on the dispute to whip up reactionary patriotic sentiment, seeking to divert attention from the social crisis at home and manoeuvre diplomatically abroad. Chinese ambassador Liu Xiaoming concluded his diatribe against Japan with an appeal for Britain and China to renew the World War II alliance—that is, against Japan—in order “to safeguard regional stability and world peace.”

The tensions between Japan and China at Davos, where business and political leaders are supposedly gathered to iron out the problems of global capitalism, underlines the bankruptcy of the social order that they all defend. Five years after the global financial crisis, the economic breakdown continues unabated, fuelling geo-political rivalries that are driving towards a catastrophic war.