August 24, 2019
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Japanese economy starts feeling effects of diplomatic spat with South Korea

 File image of a woman walking past a stock market indicator board in Tokyo, Japan, Aug. 2, 2019. EPA-EFE FILE/FRANCK ROBICHON

File image of a woman walking past a stock market indicator board in Tokyo, Japan, Aug. 2, 2019. EPA-EFE FILE/FRANCK ROBICHON

By Antonio Hermosin

Tokyo, Aug 12 (efe-epa).- The historical disputes between Japan and South Korea have in recent months devolved into a standoff between the two East Asian nations involving an increasingly-tense back-and-forth of punitive trade measures, retaliation and diplomatic snubs.

The latest episode is a South Korean boycott of the neighboring archipelago whose effects are starting to become noticeable in Japan.

Relations between the two countries have been strained over the past century due to Japan's occupation of the Korean Peninsula between 1910-45, but tensions have escalated over the past year following a South Korean Supreme Court ruling that ordered Japanese companies such as Mitsubishi to pay reparations to Korean workers who were forced into labor during World War II.

In response, Tokyo decided to toughen trade conditions and Seoul countered with similar measures. Neither party appears willing to back off in this diplomatic game of chicken.

In July, the Japanese government announced its first trade restrictions targeting the tech sector, the South Korean economy's mainstay. This led many Koreans to protest on the streets, call for a boycott of Japanese products and urge their compatriots to refrain from traveling to the Land of the Rising Sun.

On the one side is the South Korean executive spearheaded by liberal President Moon Jae-in, who has publicly backed several initiatives seeking to hold Japan accountable for its colonial past, and on the other the Japanese government, led by conservative Prime Minister Shinzo Abe, which considers those matters to be settled and is known for its revisionist agenda.

"Abe seems to be exasperated with how Moon keeps coming back to these issues," Prof. Jeff Kingston, the director of Asian Studies at Japan's Temple University, told Efe in a phone interview. "But using trade to retaliate in a dispute about history is a very dangerous approach and something he could come to regret."

So far, the number of South Korean tourists to Japan – which make up about a quarter of the total and represent the second highest-spending group of visitors to the archipelago – fell by nearly 4 percent year-on-year in the first half of 2019, according to the Japanese tourism ministry, marking the first time there has been such a drop in the past five years.

In addition, statistics from the South Korean transport ministry show a considerable decrease in the occupation rates for flights between the two nations.

This is especially worrying for Japanese regions that are highly dependent on tourists such as Kyushu (southwest) or Hokkaido (north), two classic travel destinations that have seen South Korean firms reduce or even suspend their air and maritime connections at a time when Tokyo is looking to boost the tourism industry in a bid to reactivate the slumping domestic economy.

Adding to the empire's woes is the growing boycott movement against Japanese products such as vehicles, beer and cosmetics, which now has the support of between 60-80 percent of the South Korean population, according to various polls. Several trade unions and business associations have recently joined the boycott as well.

Last month, exports of Japanese cars to South Korea plummeted by 17.2 percent compared to the previous month and 34.1 percent year-on-year, according to the South Korean customs service.

The sale of Japanese materials oriented to the South Korean semiconductor industry fell by 42.6 percent in July due to the trade restrictions imposed on the sector by Tokyo that month and which are set to be expanded to 97 percent of exports by the end of August.

A recent report by the Goldman Sachs banking group claimed that those restrictions did not represent a threat to the Japanese economy's predicted annual growth, although they were deemed likely to lead to high financial volatility between July and December.

Also, this commercial spat is taking place within the unpredictable context of the trade war between the United States and China, whose repercussions are being felt by both Tokyo and Seoul.

The fallout from the trade dispute could reach beyond the economic realm and erode Japan's global image, according to experts.

"These actions undermine Japan's credentials as a free-trade champion in the Asia-Pacific region and place Abe too close to Trumpism," Kingston said, alluding to the US president's protectionist zeal.

"This situation is harmful to South Korea as much as it is for Japan," the professor added. "Both have escalated a problem in a move that might help them internally, although it is utterly detrimental to the general interest."

In Japan, a poll published this week by the right-leaning Sankei newspaper showed that two-thirds of the country support the trade restrictions on Seoul, while 60 percent also said they were worried about their impact on bilateral relations.

The question that remains is which of the two governments will be the first to yield in this deadlock that observers consider the lowest point in their relationship since the 1965 agreement that was signed to normalize ties and bury the hatchet of historical grievances.

Some experts fear that the conflict between the two nations – which possess the second and fourth biggest economies in Asia – could otherwise expand and affect their security and defense alliances, a scenario that would have an unmeasurable impact on the region's geostrategic balance of power. EFE-EPA

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