Japan to curb South Korea exports over colonial era row

Bloomberg

Japan moved to cut off materials vital to South Korea’s all-important tech industry, escalating a long-running dispute between the neighbours over events dating back generations.
Prime Minister Shinzo Abe’s government said it would slap export restrictions on highly specialised products needed to make semiconductors and computer displays, and might also remove South Korea from a list of trusted buyers.
The move comes after South Korean courts ruled that Japanese companies must compensate Koreans conscripted to work in factories and mines during the 1910-45 colonisation of the peninsula.
South Korea called in Japan’s ambassador in Seoul to protest the action, and said it would file a complaint with the World Trade Organization. Sung Yun-mo, South Korea’s Minister of Trade, Industry and Energy, told reporters the measures were “retaliation” for South Korean court rulings, and vowed to take “necessary steps” under domestic and international law.
“It’s a statement of how incredibly frustrated Tokyo is in dealing with Seoul,” said Brad Glosserman, deputy director of the Center for Rule-Making Strategies at Tama University.
“The belief in Tokyo is that the South Koreans are forever going to move the goalposts and seek to maintain the moral and political high ground, and thus Japan is not prepared to make a deal for fear that it will never be a final agreement.”
The news weighed on shares of chip companies and display makers in South Korea, where exports of those products account for one-fifth of the total. Semiconductor exports were already under pressure, plunging 26 percent from a year earlier, amid slowing demand and escalating concerns over the much larger global trade dispute between the US and China.
In June, Japan rejected a South Korean proposal for a joint compensation fund to resolve the dispute over the forced labour claims, ratcheting up friction between the two
US allies.
Tokyo said the offer doesn’t abide by the terms of a 1965 treaty that normalised ties and states that matters of compensation are “settled completely and finally.”
That agreement was accompanied by a $300 million payment. Japan has sought to resolve the dispute using arbitration, citing treaty terms.
Japanese Deputy Chief Cabinet Secretary Yasutoshi Nishimura denied Japan was seeking to retaliate, and said
the plans were in line with
WTO rules.
The chill between Japan and South Korea was on display at the Group of 20 leaders’ summit hosted by Abe in Osaka.
South Korean President Moon Jae-in was conspicuously absent from the long list of world leaders who had one-on-one meetings with the Japanese prime minister.
Removing South Korea from a list of 27 so-called “white” countries — most of them members of North Atlantic Treaty Organization — would be unprecedented.
The move could potentially backfire. “If the restriction persists, it may serve as an impetus for Koreans to speed up development of internal production capacity for these products,” Nomura Holdings Inc’s analysts Shigeki Okazaki, Kaori Iwasaki and Zhang Yifan wrote in a
report.
Japanese companies control 90 percent of the polyimide market for screen applications, with the majority split between Ube Industries Ltd and Kaneka Corp, according to market researcher Display Supply Chain Consultants.