China took action against 40 Japanese companies and entities on Tuesday, accusing them of helping enhance Japan's military capabilities.

Beijing's move marks the latest escalation in a months-long row triggered in November when Japanese Prime Minister Sanae Takaichi said that Tokyo could use its military to defend an attack on Taiwan.

While Taiwan is a self-ruled island with many Western allies, China considers it to be part of its territory under the One China policy.

What measures has China taken?

China's Commerce Ministry restricted exports to 20 Japanese entities including some from the Mitsubishi conglomerate and the Japanese space agency, saying it was a matter of national security.

Starting Tuesday, Chinese exporters will not sell them so-called "dual-use" items, i.e., goods the government thinks could also be used for military purposes.

While Beijing had announced a broad ban on export of dual-use goods to Japan in January, Tuesday's development singles out dozens of Japan's heavyweight companies. Several of their shares took a hit on the Tokyo Stock Exchange while the Yen dipped 0.4% to 155.27 per US dollar.

The ministry added another 20 companies to a "watch list," including automaker Subaru, which will require a stricter review of exported items.

"The above measures are aimed at curbing Japan's 'remilitarisation' and nuclear ambitions and are completely legitimate, reasonable and lawful," a commerce ministry statement said.

China assured that entities operating "in good faith" have no reason to worry and that the measures would not affect normal trade relations between the nations.

How did Japan respond?

A Japanese trade official told French news agency AFP that Tokyo would "take appropriate measures" after analyzing the impact of the new export curbs.

In November, Japanese media reported that China had banned exporting seafood to the country. In January, China recalled two pandas from a Tokyo zoo, taking back one of its foremost tools of soft diplomacy.

Edited by: Elizabeth Schumacher