Seoul was blindsided by Tokyo’s retaliation

Despite maintaining an outward cool, Korea’s government is reeling after Tokyo’s sudden announcement of trade restrictions, a totally unforeseen escalation of a dispute over colonial-era forced labor.

Korean Foreign Minister Kang Kyung-wha and her Japanese counterpart, Kono Taro, held a 20-minute meeting on Friday evening in Osaka, Japan, in which the forced labor issue was discussed. But Kang was not warned of Tokyo’s planned retaliatory measures.

Japan’s Ministry of Economy, Trade and Industry on Monday morning revealed it will restrict exports to Korea of key materials used in semiconductors and smartphones.

The Korean government held an emergency meeting and announced that afternoon it will file a complaint with the World Trade Organization (WTO) over Japan’s restrictions going against the principles of a fair and open market, which were touted at the Group of 20 (G-20) summit last week. Kang confirmed Wednesday in a parliamentary meeting that Japan had not given prior warning on the restrictions, adding that the measures are “unreasonable” and should be retracted.

Japanese Prime Minister Shinzo Abe did not hold a meeting with President Moon Jae-in on the sidelines of the G-20 despite Seoul working until the last minute to arrange a bilateral summit or even informal talks. It turned out Tokyo deliberately avoided such a meeting as it was planning the trade restrictions.

The new restrictions are considered retaliation for Korea’s Supreme Court rulings awarding damages to Koreans forced to work for Japanese companies during World War II.

“The Supreme Court decisions have been made, so what could be done?” said a high-ranking government official playing a key role in diplomatic ties between Korea and Japan in February. “The poor plaintiffs scraped together what money they had for a court victory, so how could the government intervene? That is the position of the Blue House and government. Even if the Japanese companies’ assets are seized and liquidated and Japan takes retaliatory measures, it can’t be helped.”

Korea’s Supreme Court made landmark decisions last October and November ordering two Japanese companies - Nippon Steel & Sumitomo Metal and Mitsubishi Heavy Industries - to compensate Koreans forced into labor, recognizing the illegality of Japan’s colonial rule over Korea.

Diplomatic tensions rose in mid-February after plaintiffs stepped up legal procedures to seize assets of the Japanese companies after they failed to comply with the Korean court ruling.

Yet even at this point, Korean senior- and working-level officials did not think that Tokyo would be so strong in its retaliatory measures against Seoul, according to the government official.

Korean diplomats likewise did not realize the depth of the crisis despite various signals that Tokyo was planning strong retaliation.

A Japanese source in Tokyo said, “That easygoing attitude brought as a result the export restrictions on key materials needed for semiconductors and smartphones.”

But Tokyo had been preparing to take retaliatory measures against Seoul for months. Japan’s Yomiuri Shimbun reported Tuesday that Tokyo decided to restrict exports to Korea in May, and that this had been among a range of retaliatory measures it considered. A very small number of government officials reportedly chose the components to be restricted.

Imai Takaya, Abe’s executive secretary and a veteran of Japan’s Trade Ministry, is said have been heavily involved in the decision, according to one source.

Japan said it plans to remove Korea from a so-called “white list” of countries that have minimal restrictions on technology transfers, saying that “trust” with Seoul has been undermined, raising national security implications.

Japan’s white list, which includes 27 countries designated as national security allies, clears them for minimal restrictions for the export license application process. Korea has been on the list since 2004. With the new restrictions, exports of key materials would require time-consuming procedures that will involve case-by-case government permits. The process could take at least 90 days, and could amount to an essential embargo.

Three materials will be subject to restrictions starting Thursday: fluorinated polyimide, needed for smartphone displays, which Japan holds a monopoly on global production of; hydrogen fluoride, used to remove unnecessary chemical substances during semiconductor production; and photoresists, a light-sensitive polymer used in semiconductor production, which Korea mostly imports from Japan.

Out of all retaliatory measures Tokyo could have chosen, it started off with the strongest action - restrictions on exports - according to the government.

A Korean government official requesting anonymity told the JoongAng Ilbo Wednesday, “Our government’s various ministries have been reviewing Japan’s possible retaliatory measures. Restriction of exports to Korean companies is the strongest measure Japan could have taken.”

BY SEO SEUNG-WOOK, SARAH KIM [kim.sarah@joongang.co.kr]