Japan hopes export ‘embargo’ will break impasse with South Korea

Pool photo / Reuters

South Korean President Moon Jae-in, right, and Prime Minister Shinzo Abe at the G20 summit in Osaka on Friday

By Tomoko Tsuda / Yomiuri Shimbun Staff WriterJapan’s decision to impose a de facto embargo on exports to South Korea of chemicals crucial to semiconductor production is a firm hand against the country, which has shown no attitude to resolve a legal issue involving former wartime requisitioned workers.

The Japanese government hopes the measure will break the current impasse, while the South Korean government has demanded that Japan waive the export regulation, casting uncertainty over future developments. There is concern that Japan — which has promoted the importance of free trade — may be exposed to criticism from the world.

“We’re in a situation where we can’t help but conclude that Japan-South Korea relations have become seriously impaired, and it has become difficult to maintain the export control system based on a relationship of trust [with South Korea],” the Economy, Trade and Industry Ministry announced Monday, giving the reason for toughening its export control against South Korea.

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  • The Yomiuri Shimbun

Behind its decision is South Korea’s unilateral disbandment of a foundation to support former so-called comfort women that was established under the Japan-South Korea accord of 2015, as well as the South Korean Navy’s radar lock-on of a Maritime Self-Defense Force aircraft.

Japan gives preferential treatment under an export control system to so-called white countries, including South Korea, which are considered friendly nations in terms of security.

“We can’t accept [South Korea] as a white country without dialogue and a relationship of trust,” an official concerned the matter said.

In regard to a South Korean Supreme Court ruling that ordered Japanese companies to pay compensation for former requisitioned workers, Tokyo has told Seoul that “Japan is considering taking all possible options,” essentially referring to counter measures.

Behind the scenes, the Japanese government has discussed measures to stop supplying some Japanese products to South Korea and to restrict the issuance of visas. A small number of government officials have also been considering measures including narrowing down export items to be restricted for South Korea. The final draft had been nearly decided in the end of May.

The fact that formal bilateral leaders’ talks were not held in connection with the G20 summit in Osaka on Friday and Saturday became a trigger for the export restriction. The decision decreases exports to South Korea, with some fearing it could have a negative impact on Japanese companies and international manufacturing networks. But, “the strong will of the Prime Minister’s Office and surrounding lawmakers became the clincher,” an official concerned said.

‘Not to violate rules’

Skeptical voices have been raised against the action of Japan, a country that advocated free trade and anti-protectionism in its role as a chair of the Group of 20 summit. The Financial Times criticized it in an online article, saying that it “exposes Tokyo to allegation of hypocrisy on free trade.”

The Japanese government argues that a reason for the restriction is the inability to confirm that there is no problem with export management of items that are important to security, and the action has not “violated World Trade Organization rules,” an official said.

Under WTO agreements, a country can take such an extraordinary measure for security reasons. Japan is trying to make it difficult for South Korea to take reprisals by officially positioning the regulation as not being a countermeasure.

Deputy Chief Cabinet Secretary Yasutoshi Nishimura told reporters on Monday that the regulation is “aimed at proper practices of the export control system and is not a countermeasure,” insisting that it does not run counter to free trade.

The three items to be controlled by Japan’s move are the “most effective ones” to deal a blow to South Korea’s semiconductor power. Japan holds a global market share of from 70 percent to almost 100 percent in those chemicals, and South Korean companies, such as Samsung, LG Group and SK Hynix Inc., procure almost their entire supply of those chemicals from Japan.

It is seen to be difficult for South Korean firms to procure alternative resources quickly, and the regulation will be a huge blow to the production of semiconductors and organic electroluminescence (EL) displays. When it comes to semiconductors and EL displays, however, South Korean companies hold up to about 90 percent of the market share. Among semiconductors, Samsung is a top company, having a nearly 40 percent market share of NAND flash memory, which is used for saving data. If this issue prolonged, leading Japanese makers that are receiving supplies of those parts from South Korea may experience trouble with producing their own end products, such as smartphones and TVs.Speech

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