Japan's PM issues veiled threat to China over arms race

Japanese Prime Minister Shinzo Abe
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Japanese Prime Minister Shinzo Abe

Japan's Prime Minister, Shinzo Abe, took a dig Wednesday at regional rival China in one of the highest-profile speeches made since he took office in 2012.

Abe used a speech to political and economic leaders at the 2014 World Economic Forum in Davos, Switzerland, to reaffirm Japan's commitment to peace - but also said that "freedom, human rights and democracy must be assured in Asia."

China is a one-party state whose human rights record is often questioned. Abe added that leaders in the Asia region should be honest about their military spending, a clear line drawn in the sand for Japan.

In the speech, which was also one of his first major pronouncements delivered in English, Abe also referred to the Sino-Japanese dispute involving China setting up an air defense zone in the East China Sea covering some islands claimed by Japan, and said that "international sea law" must be respected.

(Read more: Why investors should be wary of China-Japan tensions)

Abe ignited tensions with the Chinese when he went to visit the Yasukuni war shrine in Tokyo, which honors convicted Japanese war criminals, along with other war dead.

He claimed the visit was "misunderstood," and that he just wanted to pay his respects to Japan's war dead.

Abe also pledged to make Japan a better place for women to work. "Japan must become a place where women shine," he told delegates.

(Read more: Japanese women at work?)

The Japanese prime minister discussed his economic policies, dubbed "Abenomics" at length, and reiterated his pledge to make Japan one of the best places to do business in the world.

(Read more: Abenomics scorecard)

Abenomics, widely hailed as the most important policy to happen to Japan for decades, involves massive monetary easing, and opening up the country through more pro-growth policies. On Wednesday, the Bank of Japan maintained its current policy settings

(Read more: Bank of Japan holds steady on policy)

- By CNBC's Catherine Boyle. Twitter: @cboylecnbc.


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