14.08.2020 Author: Konstantin Asmolov

Latest Phase of the Trade War between Japan and South Korea


The author has reported, on more than one occasion, that over the course of the history-related dispute between Japan and South Korea, the issue of comfort women is being gradually replaced with that of forced labor. In fact, its victims are trying to receive as much compensation from Japan as possible via legal action. And decisions made by South Korean courts on the issue have led to what is referred to in Seoul as a trade war between the ROK and Japan.

In Tokyo, it is believed that the problem has already been resolved. On January 6, 2020, “legal teams representing the victims of forced labor” proposed “setting up a consultative body to explore ways to find a complete solution to the issue of forced labor”. In response, Japanese Chief Cabinet Secretary Yoshihide Suga said that Japan had “absolutely no interest” in the proposal. From Tokyo’s point of view, all of these issues were settled by the Treaty on Basic Relations Between Japan and the Republic of Korea, signed in 1965. In accordance with its provisions, Japan provided South Korea with grants in economic aid and loans as part of economic cooperation between the two countries.

In the ROK, court decisions in cases involving forced labor victims appear to be “mass produced”. For example, on January 14, 2020, a group of such plaintiffs and their families embarked “on another class action suit against Japanese companies” implicated in war crimes. According to South Korea’s newspaper, The Hankyoreh, “the participants were unanimous in saying their aim in taking part in the suit was less about compensation than about restoring their dignity and exorcising 70 years of bitterness”. The lawsuit involved 33 plaintiffs accusing six companies, including the Hokkaido Coal and Boat Company, Kawasaki Heavy Industries, Mitsubishi Materials, Mitsubishi Heavy Industries, Mitsubishi Mining and Nishimatsu Construction.

A new phase in the confrontation between the ROK and Japan began on June 1, 2020, when the Pohang branch of Daegu District Court decided “to give public notice of the ruling on the seizure of Nippon Steel’s Korea-based assets” after the Japanese firm “refused to honor a ruling to compensate surviving South Korean victims of wartime forced labor”.  According to Korea.net, “it is a legal procedure of making a public announcement on the court’s bulletin board or in a newspaper so that the notice has the same effect as that of court delivery if sending court documents to recipients is difficult”.

This legal step “came after the Supreme Court of South Korea ordered Nippon Steel in 2018” to pay 100 million won in compensation to each of the four South Koreans for their unpaid wartime forced labor. As the company refused to comply with the order, the plaintiffs applied for the seizure of the steel maker’s 194,794 shares worth 973 million won (US$799,400) in PNR, a joint venture created by Nippon Steel and Korean steelmaker POSCO, involved in the “resource recirculation byproduct recycling process”.

However, the defendant, Nippon Steel, “refused to accept the court’s legal document on asset liquidation”. And if the company failed to respond to the document by August 3, 2020, the court could “issue an order to sell off the seized assets”.

The Yonhap News Agency reported that the victims had “no other choice but to resort to the court’s imminent order to dispose of the shares as long as the Japanese firm” continued to ignore the compensation ruling. According to the media outlet, “if such a thing” were to happen, “the relations between Seoul and Tokyo could plunge to the lowest point since the 1965 diplomatic normalization”. In addition, the Shinzo Abe government threatened “to retaliate against the looming sell-off order from the Korean court”. During a telephone conversation between Japan’s Minister for Foreign Affairs Toshimitsu Motegi and Foreign Minister of South Korea Kang Kyung-wha, the former urged the latter to exercise restraint by saying “the sale of seized assets” had to be avoided.

Starting at midnight on August 4, the Pohang branch of the Daegu District Court could “start the procedure to auction off some of Nippon Steel Corp.’s stake” in the joint venture company “so as to cash them out for compensating forced labor victims”. The assets subject to sale are “the 30 percent stake held by Nippon Steel” in PNR, “worth about 400 million won (US$335,000) by face value”.

In response, Japanese Chief Cabinet Secretary Yoshihide Suga said that Tokyo was “looking at all available measures” and had “a clear direction about it”. “In close cooperation with the relevant company, we would like to continue to undauntedly respond with all options in our sight from the standpoint of protecting rightful economic activities of Japanese enterprises,” the Japanese official told reporters.

According to the Yonhap News Agency, “the steps could include higher tariffs, financial sanctions, temporary recall of Japan’s top envoy in Seoul and visa restrictions”.

Nippon Steel planned to appeal the South Korean court decision on asset seizure. The move “would defer the judicial process” that could kick off the procedure to liquidate some of Nippon Steel Corp’s stake in PNR, which observers fear would worsen tensions between the two countries.

The Yonhap News Agency reported that measures Japan could take against South Korea included “further tightening of export control measures on industrial materials that Korea highly relies on Japan for”. In addition, possible financial restrictions could be imposed “in relation to some $42 billion that Japanese banks have invested in South Korean companies”.

The media outlet also said that “an eye for an eye” could not “resolve the history-related dispute between the two countries”. In fact, later in August, Seoul would have to decide whether to renew or terminate the General Security of Military Information Agreement (GSOMIA) with Tokyo. The decision has to be made by August 23, 2020. South Korean Foreign Ministry Spokesperson Kim In-chul has told reporters that the government “suspended its decision to end the GSOMIA on the premise” that it could “end the pact at anytime”.

During a press conference on August 4, 2020, the official said: “We remain unchanged in our position that the question of whether to exercise this right is something to be examined in response to Japan’s actions regarding the withdrawal of its export controls”. “GSOMIA can be ended at any time by the South Korean government, regardless of the date, and the concept of extending the agreement each year does not currently apply,” he added.

The statement did not go unnoticed in Washington. The Korean-language service of Voice of America (VOA) reported on August 6 that a US Department of State official said: “We encourage Japan and the ROK to continue sincere discussions to ensure a lasting solution to historical issues”. The official added that “the US would continue to pursue bilateral and trilateral security cooperation with the two Asian countries, in recognition of” their shared interests.

In such a climate, a number of experts have stated that South Korea “may face a much stronger backlash from the United States, which values” the GSOMIA “as a tool to contain China’s growing influence in Asia”. Park Won-gon, a professor of international politics at Handong Global University, has said: “Amid an escalating Sino-US diplomatic row, Washington wants to present a united front with Korea and Japan against China, but under the circumstance, Korea’s GSOMIA termination may bring about a fiercer backlash from the US government than last year”.

Leif-Eric Easley, an associate professor of international studies at Ewha Womans University, also thinks that “terminating the GSOMIA would not work” in South Korea’s favor. “Threatening to cancel GSOMIA provides no negotiating leverage with Japan, but instead damages Seoul’s credibility because it reflects a fundamental misreading of the strategic environment. The move would unnecessarily reduce South Korea’s capabilities, seriously damage its standing in Washington, and embolden Pyongyang, Beijing and Moscow to employ greater coercion against Seoul”, he added.

Still, Moon Jae-in’s policies on this particular issue often, somewhat unwittingly, harm its relations with the US.

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”.

Please select digest to download: