We are continuing to keep a close eye on the trade war between Japan and South Korea to provide you with coverage of the latest chapter of events as they unfold.
On August 6, Japanese Prime Minister Shinzo Abe made it clear that he was not going to consider holding a South Korean-Japanese summit until South Korea honored its commitment to the Treaty on Basic Relations between Japan and the Republic of Korea which was signed in 1965. South Korean First Vice Foreign Minister Cho Sei-young responded, saying Abe’s words are proof that the measures of economic retaliation which Japan is taking are not symptomatic of a need to optimize export controls, but stem from the historical dispute between the two countries. According to Cho, Japan needs to stop taking an egocentric position which denies the past, ignores human rights and violates the rules of free trade.
On August 7, 2019, the Japanese government officially imposed legislative amendments which had South Korea removed from Japan’s “white list” of countries with the status of trusted trading partners:1194 strategic goods that Japan supplied to South Korea have been named and will be excluded from the category of items with preferential status and a simplified export approval procedure. From now on, each and every transaction to have one of these affected goods supplied will have to go through a separate approval procedure.
Nevertheless, Tokyo has decided not to supplement the list of goods which are exported with a special authorization. The list is still contains just three essential types of high-tech raw materials in the production of semiconductors. That being the case, a preferential system has been preserved that exempts companies which have received state certification of conformity with certain standards from having to obtain export permits for three years. In other words, if a South Korean enterprise makes a transaction with a Japanese company that has been certified, then the export procedure is similar to the procedure for countries on the list of trusted trading partners.
Thus, these restrictive measures may be unpleasant, but they are not actually that drastic, although when you listen to what South Korean politicians are saying, you may be led to believe that South Korea has already been hit with a trade blockade. For instance, a well-established politician from the ruling Democratic Party of Korea, Floor Leader (Assembly Leader) Lee In-young, called Japan’s decision to exclude Korea from the white list a “declaration of an all-out war”, vowed to gain victory in the “Korea-Japan economic war” by upholding the spirit of the “independence movement”.
On August 8, the South Korean Government began discussing draft amendments to their own legislation, which would exclude Japan from South Korea’s list of priority trading partners and have a special category created for Japan, which would result in a significant tightening of the export procedure.
The Japanese media were quick to cover the proposed measures — NHK reported the breaking news. An article was published in a financial newspaper, the Nikkei (formally known as the Nihon Keizai Shinbun), which stated that Seoul had essentially taken these measures in response to having been struck off Japan’s list of priority partners. Japanese State Minister for Foreign Affairs Masahisa Sato tweeted that should this be the case, Seoul’s move would be in violation of World Trade Organization rules. The Kyodo Tsushin Agency has highlighted an increase in international concern over the deterioration of relations between South Korea and Japan.
On August 8, for the first time since the new restrictive measures had been introduced, the Japanese government approved the shipment of a batch of photoresists (one of the three types of high-tech raw materials used in the production of semiconductors) to the Republic of Korea. The South Koreans did not get the message. An emergency meeting of South Korea’s National Economic Advisory Council was held, where Moon Jae-in said that Tokyo’s official line is one thing, but Japan’s actions are really an “economic punishment” for the South Korean Supreme Court’s ruling in favor of the victims of forced labor during the Japanese occupation of Korea. Even if Japan does benefit from this move, it will only be temporary. The South Korean President has said that Japan will eventually lose the trust of the international community.
The South Korean Government took a more level-headed approach, and the discussion of draft amendments was suspended on August 8, legislative amendments which would see Japan excluded from South Korea’s list of trusted trade partners.
On August 15, Moon Jae-in made an address to the Korean public on Liberation Day, marking the anniversary of Korea’s liberation from Japanese colonial rule. In his speech, Moon touched on the recent trade conflict with Japan. He stressed that Seoul is prepared to counter Tokyo’s measures, while simultaneously stressing the importance of addressing the problem through constructive dialog.
What the South Korean President has said in his speech is very important, it gives us a measure of Seoul’s policy towards Tokyo going forward. The South Korean media did indeed note that the President made no mention of the historical dispute between Korea and Japan, with no specific mention of the sexual slavery in the Japanese army during World War II (the so-called “comfort women”).Moon made a more general statement, saying that we can build a better future by analyzing history, and emphasizing the importance of future cooperation between the two countries in the same breath. Moon said that Korea will gladly join hands with Japan if Tokyo chooses the path of dialog and cooperation.
Media outlets highlighted the fact that the 2020 Summer Olympics in Tokyo were mentioned amid rumors that South Korea may boycott the Games. Moon expressed hope that an important global event of this scale would increase the likelihood of friendly relations being restored with Japan, and urged caution in responding emotionally to Tokyo’s policy, calling for friendly relations between the two nations to be preserved.
On the same day, there were various speeches and rallies held in Central Seoul, condemning the Japanese Government. Those who took part demanded that the Japanese government lift their economic sanctions and offer an apology for the forced labor the Koreans endured. Protesters also marched from Gwanghwamun Square in the center of Seoul to the Japanese Embassy. About 100 thousand people attended the biggest rally on Gwanghwamun square. Many protesters wore t-shirts with the slogan “No Japan” or appeals not to travel to Japan or buy Japanese goods.
On the same day, August 15, the Deputy Minister for Economic Affairs of the South Korean Foreign Ministry Yun Kang-hyeon visited the UK Foreign and Commonwealth Office in London, where he held talks with the Director General of Economic and Global Issues Menna Rawlings. He presented Seoul’s position on Japan’s restrictive measures and urged his counterpart not to listen to the statements that the Japanese side had made during the G-7 Summit in France. Before this meeting in London, Yun Kang-hyeon had visited France, where he also explained Seoul’s position on this issue. At a later stage, representatives of South Korea also tried to broach the subject of Japan’s restrictive measures during the G7 Summit in Paris.
Meanwhile in Japan, also on August 15, Shinzo Abe sent a ritual offering to the Shinto Yasukuni Shrine, which honors “the souls of Japanese soldiers”. According to Kyodo News, Shinzo Abe sends offerings to the Shrine, but has refrained from making personal visits since December 2013, when he received severe criticism from South Korea and China for visiting a place that neighboring countries in Asia associate with Japanese militarism.
On August 16, in a meeting with Japanese reporters in Serbia, Japanese Foreign Minister Taro Kono yet again said that President Moon should use his position of leadership to clear up Seoul’s violation of international law. South Korea’s Foreign Ministry described the remarks as “completely arbitrary and rude” and the Ministry expressed regret over Kono’s “rude” attitude through their diplomatic channels.
There were reports of a planned meeting for August 16-17, when Cho Sei-young and his Japanese counterpart, Vice Foreign Minister Takeo Akiba, were to meet in a country in Southeast Asia to discuss the measures Japan has imposed, tightening controls on exports to South Korea, as well as the dispute over the South Korean Supreme Court ruling to have Japanese companies pay compensation to victims of forced labor among other topics. Holding a meeting in a third country which is not involved in the dispute could be an indication that the agenda for Japan and South Korea is to have an open and neutral exchange of views. However, the meeting between the two sides was called off as soon as the South Korean media published information about it.
On August 21, South Korean Foreign Minister Kang Kyung-wha met with Taro Kono in Beijing after a trilateral ministerial meeting. Once again, Kang Kyung-wha urged Tokyo to reverse its move to tighten export controls, but apart from a few vague statements that the conflict should not hamper cooperation, no further progress was made.
Between June 25 and 26, the South Korean Armed Forces carried out military drills off the disputed Liancourt Rocks. South Korea has been conducting these military exercises biannually since 1986, in June and December, which used to generally only involve the Navy and Maritime police, but since 2003 the drills have also included naval vessels, marines, military aircraft, marine patrol boats, etc. The drills performed this June covered a greater area, and the fleet included an Aegis-equipped destroyer warship with a displacement of 3,200 tons, patrol vessels, as well as P-3C anti-submarine and maritime surveillance aircraft, F-15K Slam Eagle fighters, special forces, and the AW-159 Wildcat anti-submarine helicopter. There were also marines and ground troops there who had worked on the amphibious operation on the island.
Apart from this, some members of South Korea’s ruling Democratic Party have called on the government to consider banning travel to Japan and boycotting the 2020 Summer Olympics in Tokyo, although this position has yet to secure the support of the majority. These proposals have not received much support, not even from other members of the Democratic Party of Korea (DPK). According to Deputy Seol-hyun, the public is voluntarily boycotting Japanese products and travel. In this situation, it is not for central and local government to tell people whether or not they have the right to travel to Japan. This could trigger a Japanese boycott of travel to Korea along with many other side effects.
The campaign to boycott Japanese goods is also continuing to gain momentum. Major department stores and convenience stores are taking the Japanese products out of gift sets.
On August 21, the Japan National Tourism Organization reported a 4.3% drop in the number of South Koreans who visited Japan between January and July 2019, with 4,424,000 South Korean visitors.
South Korea is importing less Japanese goods. Customs recorded a decrease in Japanese beer imports in July, which were down 45.1% compared to the previous month and amounted to 4,342,000 dollars. This figure normally increases in the summertime, but we are seeing a different situation.
Japanese car imports have also slumped. In South Korea, 17.2% less car sales were registered in July than in the same period last year. Compared to the previous month, the figure is down 32.2%.
Organizations representing self-employed individuals and small and medium-sized businesses have stopped selling Japanese products, and the Parcel Delivery Workers’ Solidarity Union has also promised to stop delivering Japanese products.
Consumption of well-known Japanese brands has halved. This has really hit the well-known Japanese clothing chain UNIQLO. Over the period between late June to late July, this brand saw its sales in South Korea plummet by over 70%. Experts have highlighted the fact that the boycott is being actively promoted through social networks, and the people getting involved are doing so on a completely voluntary basis.
The boycott is accompanied by good old-fashioned protests. A total of four candlelight vigils have already been held in front of the Japanese Embassy so far, where Japan’s move has been called an “economic invasion”, and the protesters are demanding a sincere apology for the wartime atrocities.
According to a survey KBS carried out on South Korea’s National Liberation Day, marking the 74th anniversary of Korea’s liberation from Japan’s rule from 1910 to 1945, 58.7% of South Koreans believe that the South Korean Government is doing a good job in countering the measures Japan has taken to put South Korea’s economy under pressure. 37.6% of respondents disagreed. More than half of the respondents believe that both countries will suffer if Japan continues to impose these restrictive measures.
The scandal surrounding the Japanese cosmetics company DHC is worth a mention, who uploaded a video on their YouTube channel where a Member of Japan’s House of Councilors, Aoyama Shigeharu, addresses South Korea with a speech, “distorting history” with his comments: Korea unilaterally occupied Dokdo in 1951 and Korea paid a large sum of money to lobby the US government in order to ask for help to prevent Japan from removing Korea from its white list of trusted trading partners. DHC Television also livestreamed a talk show on YouTube, where panelists said the Korea-Japan trade row will cool down soon because Koreans, by nature, forget things easily.
In response, South Korean cosmetics retailers have stopped selling DHC cosmetics, and DHC Korea CEO Kim Moo-jeon issued a statement stressing that the Korean unit has never been involved in controversial programs aired by DHC Television, and that he felt the same way as all Koreans did when he watched the programs. He has therefore demanded that the DHC headquarters in Tokyo stop broadcasting television programs that contain hate speech.
Only the Korean Wave has been left unaffected by the boycott. More than 1 million copies of the album Lights / Boy With Luv by South Korean boy band “the Bangtan Boys (BTS)” were sold in Japan. These sales figures were reported on August 9 by the Recording Industry Association of Japan. It is the tenth album the boy band has released on the Japanese market.
Another grassroots trend, rather than a message coming from the government, is the message being sent out not to overreact. The public responded when municipal workers in the Seoul Central District began hanging 1100 anti-Japan banners around the city with slogans including “NO,” with the red disc of the Japanese flag as the “O”, “I will not buy (Japanese products)”, and “I won’t go (to Japan)”, and a petition to have them removed gathered about 20,000 signatures. The justification for having these banners taken down was that this action will only worsen relations between the two countries and cause a backlash. On top of this, and what is even worse, is that this will make people believe that the boycotts have been organized by the South Korean Government and not “on an individual basis.” Then the banners were removed, and the municipal authorities began changing these slogans and stickers all over Seoul, replacing the “NO” banners with the red disc of the Japanese flag as the “O” with “STOP ABE” banners, directed at his policy.
What will happen next? It is expected that Japan’s restrictive measures will affect South Korean companies and a fall in their sales will be seen in the fields of mechanical engineering, petroleum products and semiconductors. This is indicated by the results of a survey conducted by the Korean Institute of Economic Research involving 153 large companies. Sales forecasts predict a fall of 2.8% on average, and earnings before interest and taxes (EBIT) are expected to decrease by 1.9%.
51.6% of respondents believed that Tokyo’s measures will have a negative impact on private businesses, metallurgy and the wireless sector in South Korea.
On August 11, Bank of Korea reported that the value of the South Korean won had fallen by 5%. There are concerns that the value of the won could fall to 1.250 per dollar. Out of the ten largest economies in terms of devaluation, South Korea’s national currency took third place. Only the national currencies of Argentina and South Africa were worse affected.
At a cabinet meeting on August 13, Moon Jae-in expressly warned the public to beware of “fake news,” insisting that South Korea’s economy remains strong despite Japan’s trade retaliation and the risks hanging over the country’s head in foreign policy. According to the South Korean President, fake news plays a role in shaping public opinion on the state of the national economy, which not only distorts the public’s perception of the real economic situation, but also subsequently exerts a real negative impact on the state’s economy. Moon pointed out that the South Korean economy is stable according to ratings from international credit agencies.
On the day before the meeting, Deputy National Advisor Kim Hyun-chong stressed that the impact Japan’s restrictive measures are having on South Korea is not as great as it may seem. According to Kim, analysis was carried out, taking 1,194 strategic products from Japan into account. Kim Hyun-jung said that the results of the analysis are one of the reasons why Moon Jae-in has been able to say that South Korea will “never be defeated again by Japan”. He noted that South Korea has a strong semiconductor industry, display panel industry, as well as automobile and shipbuilding industries, which create an environment where small and medium-sized businesses can survive manufacturing spare parts and materials. There are also many Japanese industries which depend on South Korea.
At the same time, Japan’s share in South Korean semiconductor exports was extremely small. According to KITA (the Korea International Trade Association), this figure was only 1% in the first half of the year, and display panels were only 0.7%. This is due to the fact that Japan is able to manufacture this product on its own. Thus, if South Korea does takes measures to restrict semiconductor and display panel exports to the Japanese market, it will have a minimal effect.
At the same time, Bloomberg has cited data from six foreign trade companies and has reported that if South Korea were to ban exports of heating fuel to Japan, there would be a sharp increase in Japanese spending in order to heat the country during the winter. About 90% of the kerosene consumed in Japan is produced by local industry. The rest of the supply is imported, most of which came from South Korea last year, which supplied 79% of the import.
What about the United States? The US would like to see the dispute between Seoul and Tokyo resolved as soon as possible. This is what US Secretary of Defense Mark Esper told reporters when he was on a visit to Japan. According to Esper, Washington intends to appeal to the governments of South Korea and Japan to resolve the bilateral conflict in order to focus on solving problems involving North Korea and China.
On August 13, Donald Trump expressed his dissatisfaction with South Korea and Japan: “Our allies take advantage of us far greater than our enemies.” He made these remarks when he was speaking in Pennsylvania. The US President said that while the US is protecting the South Korean border, the Americans cannot secure their own borders.With regard to Tokyo, the President noted that “They send thousands and thousands — millions — of cars. We send them wheat. Wheat. That’s not a good deal. And they don’t even want our wheat. They do it because they want us to at least feel that we’re okay. You know, they do it to make us feel good.”
Reports written by American (and sometimes even Japanese) experts whose point of view is closer to the official line in Seoul are widely published.Thus, a report by Matthew P. Goodman was published, who is the Senior Vice President and Simon Chair in Political Economy and Senior Adviser for Asian Economics at the American Center for Strategic and International Studies (CSIS), in which he wrote that Japan, which holds a special amount of responsibility given that it is such a strong country, should look for ways to resolve the dispute with South Korea in order to avoid conflict breaking out. The decision to impose restrictive measures was taken by the Japanese Government shortly before the general elections, which has aroused suspicions of the political nature of Tokyo’s actions. It has been pointed out that these measures could seriously damage the Japanese industry for key industrial materials and the South Korean semiconductor industry, which would inevitably affect the world economy.
Well-known economist Sohn Sung-won, a professor of economics at Loyola Marymount University, has called on the South Korean Government to develop a long-term strategy to resolve the trade feud with Japan, calling it an “emotional and political issue”, and more than just an issue which affects trade. He said that South Korean policy is changing too dramatically with each new administration.
The point is reiterated in another article, that both countries want all or nothing and are unwilling to compromise. For the US, however, the crisis that is playing out between its two key allies in Asia is detrimental in many ways — it is damaging bilateral alliances with South Korea and Japan, trilateral allied policy coordination, and work to curb the actions of North Korea and China.
A trade war is indeed in full swing. We will try to keep you up to date with comprehensive coverage of the dispute between Japan and South Korea – from the intelligence-sharing agreement between the two countries which was recently scrapped (which we see has been met with strong displeasure in Washington) to Seoul’s attempts to exploit radiophobia.
Konstantin Asmolov, PhD in History, Leading Research Fellow at the Centre for Korean Studies of the Institute of Far Eastern Studies of the Russian Academy of Sciences, exclusively for the online magazine “New Eastern Outlook”.