Published: Tue, July 02, 2019
Markets | By Otis Pena

Trade war breaks between South Korea and Japan

Trade war breaks between South Korea and Japan

Japan imposed restrictions on exports used by South Korea's chip and smartphone companies on Monday, ramping up tensions between the two countries over the use of forced labor during World War II.

Seoul quickly hit back, saying the measures violated global law and threatening to raise the issue at the World Trade Organisation.

In a landmark ruling in October, South Korea's top court ordered Nippon Steel & Sumitomo Metal pay 100 million won ($88,000) each to four plaintiffs forced to work for the company when Japan colonized the Korean Peninsula from 1910-45.

Japan will restrict the export to South Korea of key chemicals used in the production of electronics, reports Japanese newspaper Sankei.

Japan said they were the result of a breakdown in trust with Seoul.

"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 hard 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.

Japan's METI has made individual applications mandatory, for export of fluorinated polyimide and hydrogen fluoride, to South Korea.

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It means that exporters will now have to apply for permission for each batch they wish to export to South Korea, a process that takes around 90 days each time, local media reported. Even worse, the Japanese government will ask the public's opinion on removing South Korea from its "white country list" so - if the Japanese people agree - all South Korean companies will have to face various restrictions.

The trade minister, Sung Yun-mo, said the government in Seoul planned to file a WTO complaint.

But Japan's deputy chief cabinet secretary Yasutoshi Nishimura told a regular briefing that the move was "in accordance with worldwide export regulations and World Trade Organisation rules".

"It is not a retaliatory measure", Deputy Chief Cabinet Secretary Yasutoshi Nishimura said, noting the measure came about because of overall difficulties in "maintaining a relationship of trust with South Korea in carrying out export controls". There's a reliance on Japanese exports that can't be diversified immediately.

But the Japanese ministry said the latest move comes after overtures to patch up relations with South Korea failed at the Group of 20 summit in Osaka last week.

When relations were normalised, Tokyo agreed a reparations package of grants and cheap loans for victims of various wartime policies, which it says resolved all outstanding claims.

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