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Japan-South Korea feud takes dangerous turn as Trump stays quiet

The Japanese national flags hang while pedestrians walk along a street in Tokyo on May 1, 2019.

KIYOSHI OTA/BLOOMBERG

By JON HERSKOVITZ | Bloomberg | Published: July 3, 2019

For decades, Japan and South Korea have managed to keep their feuds largely limited to rhetorical barbs and diplomatic snubs. Now, with the U.S. increasingly sitting on the sidelines, it's drifting toward economic conflict.

Their dispute over what they see as proper contrition for Japan's 1910-1945 colonial rule over the Korean Peninsula is set to change Thursday when export restrictions from Prime Minister Shinzo Abe's government take effect. The measures are set to curb the supply of highly specialized products needed to make semiconductors and computer displays - an economic broadside in a fight that has so far been mostly a war of words.

Tokyo contends that South Korea started the latest dispute when its courts last year ruled that Japanese companies must compensate Koreans conscripted to work in factories and mines for Japan's imperial war machine. The worry now is that tensions between the major trading partners and U.S. allies could spiral out of control.

"This is starting down the road toward economic warfare, and it's very dangerous,'' said Daniel Sneider, a lecturer in international policy at Stanford University who has written extensively about how Japanese and Koreans view their shared history.

The U.S. has traditionally stepped in when tensions have become heated between two of Asia's largest economies as they all confront security threats from North Korea and the ever-expanding shadow of China's military in the region.

But President Donald Trump has questioned America's open-ended troop deployments in Japan and South Korea and his administration has been conspicuously absent when his Asian allies bicker. Trump was in Japan and South Korea over the past week but made no public statements to ease the conflict, which might be interpreted by Seoul and Tokyo to keep on sparring, Sneider said.

"Americans have always understood that the escalation of tensions between our two principle allies in northeast Asia is a threat to our own national security interests," Sneider said. "This government has abandoned its responsibility."

A State Department official, who asked not to be identified, said it is crucial for South Korea, Japan and the U.S. to maintain close relationships in the face of shared regional challenges.

The U.S. helped broker the 1965 treaty establishing ties between Japan and South Korea that included a payment from Tokyo of about $300 million - $2.4 billion in today's money. The pact said all claims are "settled completely and finally." South Korea's then autocratic government used the funding as seed money for its industries.

But the treaty didn't ease the deep emotions in South Korea over forced labor, as well as women forced into sexual servitude at Japanese Imperial Army brothels and a territorial dispute over a set of islets claimed by both countries. As tensions brewed, the two governments largely kept their often interdependent economic relations away from the fray.

That changed with the South Korea Supreme Court decision, which initially affected 18 claimants who won compensation ranging from about $88,000 to $134,000 each. South Korean President Moon Jae-in has argued the treaty doesn't prevent Koreans from suing Japanese firms and that the court decisions should be respected.

The lawsuits could grow, with historians estimating hundreds of thousands of Koreans were used as forced labor. More than a dozen such cases are pending in South Korea involving about 70 companies, according to the Japanese Ministry of Foreign Affairs.

Japan called for invoking the arbitration process under the treaty and South Korea later proposed a joint fund. That didn't sit well in Tokyo after Moon's government effectively shut down a previous fund brokered in 2015 with Japan for compensation and a personal apology from Abe to the women forced into sexual servitude.

"The issue of conscripted laborers is not a historical issue, but a question of whether an international agreement between nations is maintained," Abe said Wednesday about the dispute.

The move to restrict chip material exports to South Korea could have "serious implications" for global supply chains and disrupt production at South Korean technology companies including Samsung Electronics and SK Hynix, Moody's Investors Service wrote in a report published Tuesday. The companies have downplayed the matter but saw their shares fall Tuesday on the news.

South Korea plans to bring the issue to the World Trade Organization and is looking at making the materials on its own. South Korea "will strongly pursue localization through technological development and intensive investment in about 100 essential materials," South Korean Finance Minister Hong Nam-ki said.

Kak-Soo Shin, who has been at the front line of the disputes when he served as South Korea's ambassador to Japan from 2011 to 2013, said the current friction could be "heralding a very dangerous and vicious cycle of escalation."

He advised South Korea to understand why Japan is frustrated over its response and warned Tokyo of starting "an irreparable crisis" that could impact their security, adding: "They should think earnestly who will benefit from this profound rift between Seoul and Tokyo."

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With assistance from Isabel Reynolds, Lily Nonomiya, Sam Kim, Jihye Lee, Margaret Talev and Bill Faries.
 

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