Japan declares economic war

Kim Dong-ho
The author is an editorial writer of the JoongAng Ilbo.

South Korea and Japan are about to cross the Rubicon. The export restriction Japan has imposed on certain industrial materials bound for Korea could lead to an economic war between the two neighbors. Tokyo has strategically chosen three materials essential for making chips and displays, Korea’s major export items. Currently, Japanese companies dominate 70 percent to 90 percent of global supplies of those materials.

Japan’s Ministry of Economy, Trade and Industry explained that the export restriction — which will take effect from Thursday — is the result of a “loss of trust” between the two governments. Given the diplomatic standoff since the Korean Supreme Court ordered Japanese companies to compensate individuals for forced labor and a seizure of their assets in Korea, Tokyo’s latest action constitutes retaliation. The move is surprising because Tokyo kept Korea on a list of countries that receive preferential treatment for exports even as Japan’s top technology companies declined one after another due to the ascension of Samsung Electronics.

To prepare for a possibly long economic war with Japan, we must clearly understand why it took such a radical measure. Japan has turned hard-line because its perception of Korea has changed in a fundamental way since the launch of the liberal Moon Jae-in administration in 2017. Tokyo has cast away Seoul — which it once valued as a postwar ally — after Seoul turned decisively anti-Japan under President Moon.

In October last year, Korea’s Supreme Court delivered a milestone ruling ordering Nippon Steel & Sumitomo Metal to pay 100 million won ($88,000) each to four plaintiffs who were forced to work for the company during the colonial period. It delivered a similar verdict to Mitsubishi Heavy Industries. The top court also approved the seizure of those companies’ assets in Korea for noncompliance. The Japanese companies and government have strongly opposed these legal actions as potential victims could eventually number as many as 200,000. If Japan complies, Chinese survivors also could join the move to demand compensation.

The Japanese government brims with hard-liners, including Prime Minister Shinzo Abe and Deputy Prime Minister Taro Aso. A thaw may not be possible as long as Abe is in power, given the intentional cold shoulder he gave Moon at last week’s Group of 20 Summit in Osaka, Japan. Abe allowed no more than an eight-second hand-shake photo session with Moon during his stay in Japan.

President Moon Jae-in, right, is welcomed by Japanese Prime Minister Shinzo Abe for a welcome photo session at the Group of 20 summit in Osaka, Japan, last Friday. [AP/YONHAP]

An influential figure in Japan shared a story about Abe. He had a chance to chat with Abe in 2013. He had advised the prime minister to favor South Korea. Abe disagreed, saying he trusted Beijing more because it has not betrayed a promise. “In return for normalizing ties, Seoul signed a basic treaty with Tokyo in 1965, settling all reparations for wartime and colonial pains with $500 million aid for economic reconstruction,” the Japanese figure explained. “But Koreans now disavow an inter-government agreement and demand individual compensations. Tokyo does not want to deal with a country that does not honor international agreements. It is not just Abe. Japan is thinking it can do without South Korea.”

Abe’s term ends in September 2021. But there is a possibility that he could win a fourth term until September 2024. His approval ratings are stable, thanks to a robust economy. Changes in the Japanese people’s attitudes toward Koreans are also behind the tougher stance in Tokyo.

One Japanese diplomat said Tokyo’s pride has been hurt after China became the world’s second largest economy. Korea is outshining Japan in many ways. It is home to global giants like Samsung Electronics. Young Japanese rave over Korean brands and K-pop.

Japan’s retaliation reflects these complex factors. The rulings have given an excuse for Tokyo to find a scapegoat and take out its frustration. Given the factors at play, the bilateral relationship could be set for real trouble. Tokyo has declared war on Seoul despite potential damage to its own companies. Seoul must try to minimize the fallout.

JoongAng Ilbo, July 3, Page 31