Japanese direct investments to China are also falling. They declined 20 percent over the last three years, and the numbers for the first quarter of this year are showing no sign of any significant improvement in the months ahead.

China apparently can live with that, but Japan is finding it hard to get substitutes for its flailing export and investment business with the big neighbor. And that is a considerable difficulty at a time when Japan's economy showed virtually no growth in the first quarter and overseas sales – accounting for nearly one-fifth of GDP – declined 2.5 percent.

Weakening exports are a big setback for Japan's traditional business cycle recovery, because, typically, a sustained increase in overseas sales is necessary to set in train business investments, rising employment, personal incomes and household spending. That scenario is now impossible with declining exports and a weak (2 percent) growth of business capital outlays over the last two years.

Japan's business with South Korea is much worse than with China. Exports and direct investments are down 12.9 percent and 82.5 percent, respectively, in the first half of this year. Japan can probably shrug this off, but it is sad to see such a deterioration of economic ties.

South Korea can also live with that, but here is a punch that Seoul may find hard to take: Inter-Korean security threats could undermine the flourishing business with China.

Indeed, Beijing is strongly opposed to South Korea's decision to install a missile shield against military challenges from North Korea. China says that is unacceptable because such defense equipment poses problems for its own security.

Trilateral dialog

And the upshot is this: South Korean media are reporting about economic and other measures the Chinese are apparently taking to force Seoul to think again.

That is a tough call. China takes 25 percent of South Korean exports, and China's vast and growing markets are crucially important to Korean industries, ranging from automobiles to telecommunications equipment, tourism, cosmetics and entertainment. China also has a large presence in South Korea's insurance, high-tech, medical instruments, beauty products, and holds nearly one-fifth of the Korean public debt.

Clearly, a solution must be found to protect the economic relations among these three countries. Otherwise, the damage could extend to business transactions well beyond their trilateral framework.

For example, these three East Asian economies could take most of the business in the huge Central Asian and European markets as One Belt One Road projects are integrated with those conducted by the Eurasian Economic Union and with investment programs financed by the EU. This is not just the question of building highways, high-speed rail lines and port facilities; there is also an entire range of energy, hospitality, health, education and entertainment services that will be needed to complete these large transcontinental projects.