Official socio-economic cooperation towards peace, stability, development and prosperity between ASEAN-Japan started with the Synthetic Rubber Forum in 1973. Facing various geopolitical challenges in 43 years, ASEAN-Japan cooperation has left a positive impact inthe development ofSoutheast Asianeconomy and society. Stimulated by projected trade growth and strong economicties,ASEAN and Japan continueto enjoy a close relationship built on the principle of ‘heart to heart’ through the Fukuda Doctrine of1997. Although ASEAN and Japan remainkey partners, the relationship has facedvarious challenges in the 21stcentury. Among the major challenges that affect relationsbetween Japan and ASEAN is the rise of China as a major power in the East Asian region. Economic cooperation being amajor aspect in the interaction of China and ASEAN hascreated economic competition between China and Japan in Southeast Asia. This research examinesJapan’s response toChina’seconomic incentives and initiatives towards ASEAN. Research shows that Japan’s responses includesFree Trade Agreement (FTA), development of infrastructure connectivity, and strategic partnership.