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An emotional approach doesn’t help at all

Published: 13 May. 2024, 19:44

Once a symbol of Korea-Japan corporate partnership is poised to turn into another case of a fallout between the two neighbors. Korea’s internet giant Naver is under pressure by the Japanese government and partner, Softbank, to divest some of its 50-percent controlling stake in Line, the dominant chat app in Japan, following the leaks of personal information last November. The affair escalated into a diplomatic matter after the Korean government expressed “regret” and vowed to “strongly” respond to the Japanese government’s “discriminatory and unjust” action against a Korean enterprise.

Naver’s Line business in Japan went under a joint venture, A Holdings, which it set up together with Softbank by merging with Yahoo! Japan in 2021. A Holdings, equally owned by Naver and Softbank, is the largest shareholder in LY Corp. which operates Line and Yahoo! Japan, used by 97 million people in Japan alone — almost all Japanese, including Japanese administrative institutions.

LY Corp. received an administrative guidance after a leak of private information of more than 510,000 users from unauthorized access to Naver’s cloud system last November. The Japanese government issued two administrative guidances and ordered LY Corp. to “review the relationship where the outsourced company (Naver) has a significant degree of capital control.”

LY complied with the government order and vowed to dissolve its consignment relationship with Naver for technological independence and removed its only Korean board member last week. Naver also admitted to the possibility of a stake divesture. The forcible way of Naver exiting from Japan reignited deep-rooted anti-Japanese sentiment in Korea.

It is rare for a democratic government to interfere in a private company’s management affairs. Yet Japan’s Ministry of Internal Affairs and Communication impaired the free-market principle by advising changes to the capital control structure, inviting suspicion of ousting Korean capital from the Japanese market to protect its domestic data. The Korean government maintained neutrality in the beginning, saying it cannot get involved in an individual corporate affair. But the government acted overly lukewarmly, drawing suspicion that it sidestepped so as not to ruin the hard-achieved friendly ties with Japan in the Yoon Suk Yeol administration.

Tokyo said that its action was not aimed at pressuring management change, while Seoul suddenly acted aggressively upon facing negative sentiment at home. Both governments must set emotion aside and address the problem to serve both corporate and national interests and sustain the hard-won partnership in the future.