Japan-South Korea Tensions 2019:

A Singaporean View

KB Teo

SYNOPSIS

The current Japan-South Korea tensions are related to historical grievances and trade conflicts.  There are no winners in a trade war. Seoul, wisely, has a keen interest to end the dispute as soon as possible.

COMMENTARY

The recent Japan-South Korea tensions arose due to a loss of trust over an October 2018 South Korean Supreme Court ruling ordering three Japanese firms to compensate South Korean "comfort women" for “forced labour” (sexual slavery) during World War Two.  These firms are Mitsubishi Heavy Industries, Nippon Steel, and the Nachi-Fujikoshi Corporation. Tokyo strongly condemned the court ruling. In 1965 when Japan and South Korea normalized their relations, Tokyo paid US$2.4 trillion in loans and aid to settle the compensation issue. But Seoul argued that individuals had the right to seek justice on their own.

In August 2019, President Moon Jae-in and US Defense Secretary Mark Esper agreed to maintain the 2016 Seoul-Tokyo intelligence-sharing pact.  This shares vital information on North Korea’s nuclear missile program. It was renewed by South Korea on 23 November 2019, just six hours before it expired.  

In August 2019 South Korea decided to end it, raising tensions.  In July 2019, Japan had imposed export controls on materials for ROK's semiconductor industry. Tokyo said that these strategic materials were illegally sent to North Korea.  The Korea Economic Research Institute said a 30% curb on components from Japan would result in a US$35 billion loss to South Korea's economy.

Japan and South Korea have enjoyed rapid growth. Japan is the world’s third-largest economy, with a GDP per capita of US$39,286. South Korea is the world’s 11th largest economy.  Over the past twenty years, South Korea has caught up with Japan, with a GDP per capita of US$31,362. On the people-to-people level, more South Koreans visit Japan than any other nation except for China.  

Japan and South Korea have a bitter territorial dispute over the Takeshima/Dokdo islands in the East Sea.  South Korea complained to the WTO and lobbied ASEAN. Few countries, as expected, are keen to get involved. Japan and South Korea are both ASEAN’s major trading partners. In November 2018, President Moon unveiled a new “Southern Policy” aimed at deepening ties with ASEAN. In 2018, ASEAN was South Korea’s second-largest trading partner, after China. Japan is Singapore’s 5th-largest trading partner, after China, Malaysia, Indonesia, and the US.  PM Lee Hsien Loong visited the ROK from 22-24 November 2019 to boost bilateral ties. He held talks with President Moon.

South Korea's economic problems

 Since 2001, South Korea is Japan's third-largest trading partner.  In 2018, their bilateral trade hit a record US$89 billion. In 2018, Japan had a US$24 billion trade surplus with South Korea.  Japan had huge investments of US$4.9 billion (2018) in South Korea compared with Seoul’s investments of US$2 billion in Japan. Seoul has much to lose if the tensions persist. 

President Moon strongly encouraged South Korean firms to develop the ability to produce the goods restricted by Japan. He accused Japan of trying to destroy South Korea’s export-led economy.  But history is a big obstacle: an estimated 75% of Japanese and South Koreans mistrust one another.

Japan and South Korea have major differences in East Asian affairs.  On North Korean denuclearisation, President Moon supports the easing of sanctions.  He called for Korean Reunification by 2045. But PM Shinzo Abe insists on maintaining a tough policy unless Pyongyang first denuclearized.  The result is an impasse. Since 2004, China has overtaken the US and Japan to become South Korea's largest trading partner. Japan and South Korea’s willingness to achieve a compromise is due to the cost of their disputes.  Both economies are struggling. Japan's government has lowered its own growth forecast. South Korea’s growth is also weaker. 

The US is caught in a dilemma.  South Korea and Japan are treaty allies of Washington. American mediation efforts have so far failed.  The US fear is that the Japan-South Korea dispute could lead to a weaker front against North Korea and China. The Inter-Korean Dialogue is making good progress.   President Moon and Chairman Kim Jong-Un have already met several times.  The latest developments indicate that Tokyo and Seoul are keen to de-escalate tensions.  In May 2019, Japan and South Korea participated in US-led Pacific naval exercises. In October 2019, PM Abe met South Korean PM Lee Nak-Yon to improve ties.

Implications

For Singapore, Japan and South Korea are major trading partners.  Japan is Singapore’s 5th-largest trading partner, while South Korea is the 7th. Japan and South Korea are ASEAN’s largest trading partner, after China.

As G7 industrialised states, Japan and South Korea are vital to the health of the global economy.  Despite their current differences, the fundamentals of Japan-South Korea relations are sound. They share vital common interests in helping to maintain peace and prosperity in East Asia. South Korean chaebols are keen to end the tensions with Japan.  It is unlikely that the Japan-ROK tensions will deepen. The urgent and vital process of Japan-South Korea reconciliation has started.

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KB Teo is a former diplomat with the Singapore Ministry of Foreign Affairs.  He obtained a Masters’ degree (IR) from the Australian National University.