East Asian triangle in flux: Taiwan up, Japan back, Korea at risk

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East Asian triangle in flux: Taiwan up, Japan back, Korea at risk

Published: 13 Dec. 2025, 07:00

Audio report: written by reporters, read by AI

The TSMC logo is displayed at its fabrication plant in Kaohsiung, Taiwan on June 7. [REUTERS/YONHAP]

The U.S.-China power struggle is reshaping the economic landscape of the East Asian “JaKoTa” triangle — Japan, Korea and Taiwan — with Taiwan rising rapidly on the back of its overwhelming strength in the semiconductor foundry sector.

Japan, meanwhile, appears to be emerging from its “lost three decades” — a period of economic stagnation — while some argue Korea is now facing a crisis of its own.

Taiwan’s exports in November increased by 56 percent year-on-year to $64.05 billion, according to Taiwan’s Ministry of Finance on Wednesday. It was the largest increase in 15 and a half years.

This figure easily surpassed the previous record set in October, when Taiwan surpassed $60 billion in monthly exports for the first time with $61.8 billion. Cumulative exports through November stood at $578.49 billion.

The annual export forecast is around $640 billion, an increase of roughly 35 percent from the previous year — a historic feat, breaking both the $500 billion and $600 billion thresholds.

The key driver behind Taiwan’s export surge was semiconductors. Demand exploded around TSMC, which has cutting-edge chip production capabilities, fueled by the rapid growth of the AI market.

With most global tech giants like Apple, Nvidia, Broadcom and AMD relying on TSMC, virtually everything the company produces is sold abroad.

People walk past the Taipei 101 skyscraper building in Taipei, Taiwan, on Jan. 24. [EPA/YONHAP]

“The speed at which infrastructure such as data centers is being built is accelerating, and governments around the world are actively pushing for sovereign AI, so hardware demand will remain strong,” said a Taiwanese Ministry of Finance official.

The term “JaKoTa” was first used in 1997 to refer to this East Asian triad. Recently, global investment banks have adopted the term to describe a new economic bloc, noting that the three countries share democratic systems, advanced technologies and robust manufacturing sectors.

The three JaKoTa nations have much in common. They are geographically island nations, culturally connected through Chinese character traditions and are all ethnically homogeneous. Their economies are export-driven and based on manufacturing, with proximity to China — the world’s largest market — giving them an edge in accelerating growth and ushering in the “JaKoTa era.”

However, as the U.S.-China rivalry intensified and global supply chains were restructured, changes began. While Korea and Japan lost their manufacturing competitiveness in China, which was traditionally their key export target, Taiwan forged a new path into the U.S. market by leveraging its strength in semiconductor foundries.

Taiwan’s success in creating a semiconductor powerhouse like TSMC is due to its early, government-led, single-minded strategy focused on foundries.

Starting in 2016, the Taiwanese government shifted its economic structure — which had been centered on small- and medium-sized enterprises producing small batches of many products — through strong industrial policies. This was possible because of TSMC, which enabled a trickle-down effect throughout back-end processing, server assembly, packaging and the broader hardware sector.

The TSMC logo is displayed outside its museum in Hsinchu, Taiwan on Oct. 9. TSMC announced its net revenue for September this year at $10.87 billion, down 1.4 percent from August but up 31.4 percent compared to September 2024. [EPA/YONHAP]

“Even during a drought, Taiwan prioritized water for semiconductor plants over agriculture. That kind of full-scale government support is now bearing fruit,” said Jeon Byeong-seo, director of research at the China Economic and Financial Research Institute.

Japan, which led the semiconductor industry in the 1990s, fell behind Korea in the 2000s. Now Korea finds itself nervously watching Taiwan’s rise.

Taiwan’s changing status is backed by hard numbers. Earlier this month, the Taiwanese government revised its 2025 economic growth forecast upward to 7.4 percent — 2.9 percentage points higher than its August forecast and the highest since 2010, when it hit 10.3 percent.

A container crane stands at a port in Tokyo, Japan, on Dec. 8. [EPA/YONHAP]

The Asian Development Bank also revised its forecast for Taiwan’s growth on Wednesday to 7.3 percent, up 2.2 percentage points from its September estimate. This figure is far ahead of Korea’s 0.9 percent and Japan’s 1.1 percent.

Its current account surplus as a percentage of GDP stands at 13.8 percent — well above Korea’s 4.8 percent and Japan’s 3.9 percent.

Taiwan’s forecast export total for this year — $640 billion — is about 90 percent of Korea’s. Back in 2016, Taiwan’s exports were only about half of Korea’s, but in less than 10 years, it has nearly caught up.

Taiwan has already surpassed Japan in per capita GDP when converted to U.S. dollars and is projected to surpass Korea as well this year. Korea’s per capita GDP is expected to drop by 0.8 percent year-on-year to $35,962, according to the International Monetary Fund.

Per capita GDP for Taiwan, in contrast, is expected to reach $37,827. If these projections materialize, Korea will be overtaken by Taiwan for the first time since 2003 — a reversal 22 years in the making.

A container ship berths at a port in Tokyo, Japan, on Dec. 8. On Dec. 8, Japan's Cabinet Office announced that the country's revised GDP figures for the July to September period showed an annualized drop of 2.3 percent. [EPA/YONHAP]

Although both Korea and Japan are nervous about Taiwan’s rapid rise, Japan at least is showing signs of escaping from a prolonged slump.

Buoyed by improving corporate earnings, exports have been recovering steadily since 2021. An influx of global capital looking to take advantage of Japan’s low interest rates has also led to a booming stock market.

After Prime Minister Sanae Takaichi — a declared successor to Abenomics — took office, expectations have been growing around new policies such as semiconductor revitalization and defense industry development.

In a recent report, Nomura Securities, a Japanese financial services company, said, “The Takaichi Cabinet clearly presented two keywords: ‘weak yen’ and ‘fiscal expansion,’ which are factors increasing Japan’s investment appeal.”

Korea’s situation is different. Korea is facing a third consecutive year of sub-2 percent growth. If current forecasts hold, Korea’s growth rate will fall below Japan’s this year — the first time since the 1998 Asian financial crisis.

Cars made for export are seen parked at a port in Pyeongtaek, Gyeonggi, on Dec. 4. [NEWS1]

There are optimistic projections that Korea’s annual exports will surpass $700 billion for the first time this year. However, excluding semiconductors, exports have actually declined compared to the previous year.

“Taiwan has built an ecosystem spanning the entire semiconductor production process and can respond quickly to demand, whereas Korea faces difficulties in supply chain diversification and ecosystem expansion,” said Kim Mi-seung, a senior researcher at the Korea Center for International Finance.

This means that despite solid short-term export performance, Korea’s heavy reliance on memory chips leaves it vulnerable to global economic fluctuations.

Korea’s dependence on semiconductors is fundamentally different from Taiwan’s deliberate “all-in” strategy. As the special advantage Korea enjoyed from its economic ties with China in the 2000s disappeared, key industries like steel and petrochemicals lost competitiveness, leaving semiconductors as Korea’s last stronghold.

The other growth engine — domestic demand — remains deeply stagnant. Since the Covid-19 pandemic, Korea’s economy has been weighed down by falling real income and persistently high living costs.

People pass by notices on government support programs for job seekers on a street in Mapo District, western Seoul, on Dec. 9. [NEWS1]

At the same time, Korea is grappling with the world’s lowest birthrate and the fastest aging population, which are dragging down its potential growth rate and creating a complex crisis.

Experts warn that this may be Korea’s last economic “golden time.” Japan, as a key currency country, had the stamina to endure long stagnation — but without effective solutions, Korea could fall into a prolonged period of low growth.

“Over the past 10 years, as Taiwan grew rapidly, Korea was caught in two major political upheavals and missed its chance,” said Kim Sang-bong, an economics professor at Hansung University. “Now, industrial restructuring and tackling long-delayed issues like labor reform can no longer be postponed.”

Jeon added, “All three countries have staked their futures on semiconductors — in the end, the winner will take all.” He said, “The key is to build fabs as quickly as possible. To stay in the speed race, we need full-scale national support — not just tax credits.”

This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.
BY JANG WON-SEOK [[email protected]]