It's true that Japan relies partially on China for economy, but the uprise of India has attracted Japanese firms for India as an alternative. Japan has been very uneasy about the anti-Japanese protests that occured months ago in China, and a Japanese embassy staff suicide for threats from Chinese intelligence to share secrets. In polls months ago, more than half Japanese showed strong distrust towards Japan, even more than the US. The government of Japan has also been very uneasy about the territorial disputes of the Senkaku island claimed as China's territory, and the Okinotori island which China claimed as rock, and China's aggressiveness for drilling energy source at East China Sea which the government of Japan claimed the energy source also may be connected on the other side of the boundry. while there are groups within the Liberal Democratic Party that opposes the visit of the shrine, those people have likely become a minority since the last election. The factions are losing power, and coservative/right Abe Shinzo of the Mori faction is still popular by the people leading polls for who is favored to be the next Prime Minister. The strong anti-Japanese trends in china will probably continue to push both away, and Japan will continue to seek India as an alternative for investing. Any other questions, which I may help you with my background of study on East Asia?
Both sides are being idiots about the situation, and have digged so far into their respective holes that they can't back out now without "losing face." Economic relationship between China and Japan is at the highest point ever in the meantime.
The only plan now so to speak is to wait until Koizumi steps down this year, and start anew. Of course if Taro Aso succeeds Koizumi, then things will probably get worse. But even Abe will be an improvement over Koizumi in restarting Sino-Japanese ties. Chinese Communist government is traditionally more pro-Japanese than the general Chinese population, though they aren't helping matters lately either. This whole anti-Japanese sentiment coincided with Koizumi's visits to Yasukuni. A halt on visiting there, or the transfer of the "souls" of 1000 or so convicted war criminals from Yasukuni to somewhere else will relieve a lot of that anti-Japanese feelings in China. Right now it's hard to be a pro-Japanese Chinese in China, because of Yasukuni and also because Japanese politicians like Aso like to talk out of their asses in public and be deliberately provocative every week. It's almost as if the Japanese like Aso want to see anti-Japanese protests, so they can silence the pro-China faction within the Japanese government. The anti-Japanese protests in China of course are making it hard for the pro-China faction in Japan too. So it's cyclical and hard to pinpoint who is ultimately responsible for the rift. Factions within the governments of both countries are using the rift for their own political gains.
India is much farther away from Japan than China. There is a greater cultural and language barrier between India and Japan as well. A Chinese and Japanese can pick up a newspaper from the other's country and read it with nearly 70% comprehension. It is ultimately in both China and Japan's interest to settle their differences and cooperate more. Their economic future is already becoming more intertwined. They are like France and Germany. India can serve as an alternative, true, but a complete rift between China and Japan will in the long-run isolate not China in East Asia, but Japan.
As opposed to the anti-japanese protests suffered in one of the Honda plants in India? The workers just walked out.