Japan has never been a simple partner with South Korea. Although both democracies have long been well-consolidated, bilateral relations have been constantly marred by historical and territorial conflicts. But today, since diplomatic ties were formed in 1965, their connection may be at its highest stage.
The scenario started to deteriorate in July when Japan’s trade ministry implemented fresh licensing demands that impeded three chemicals exports that South Korea needed to produce high-tech products such as semiconductors and display panels. Japanese authorities asserted the move was essential to avoid the illegal shipment of delicate products for military use to North Korea. South Korea called a groundless justification, and customers initiated a boycott of Japanese products, from beer to clothing.
According to South Korea, Japan is attempting to punish it for a 2018 Supreme Court decision ordering Japan’s Mitsubishi Heavy Industries to compensate South Koreans for forced labour during Japan’s first half of the twentieth-century occupation of the Korean Peninsula. Japan argues that the Diplomatic Relations Treaty of 1965, which included $500 million in grants and loans to South Korea, addressed all compensation issues, while South Korea argues that the treaty does not cover individual claims.
Japan has not stopped at semiconductors in any event. South Korea was withdrawn from its “white list” of nations receiving preferential trade treatment in August. Japanese exporters now require public permission every time they export a “strategic item” shipment to South Korea, including 1,115 parts and material kinds.
South Korea then complained about Japan’s export controls with the World Trade Organization and removed Japan from its white list of trusted trading partners.
It also announced that it would not renew the GSOMIA, a bilateral agreement that promotes exchanges of delicate intelligence, including on North Korea’s atomic and missile programs.
Spat’s financial implications are already becoming evident. Increasing tensions, coupled with a wider financial slowdown, led South Korean exports to Japan to decline in August by 6.2% a year. Over the same era, South Korea’s Japanese vehicle sales plummeted by 57%, mainly due to consumer boycotts, and Japan’s percentage of Korean tourists fell by half.