Regional Focus

Japan-Korea relations show signs of thawing

Published: Aug 2022

Japan and South Korea have had a long history of soured relations – particularly related to the reparations related to Japan’s colonial past – which have impacted trade between the two countries. Things are looking more positive, however, with a new President in South Korea and a friendlier diplomatic tone.

Busan Harbor Bridge at night

It’s like a chronic condition that flares up every now and again, sometimes with different symptoms. It’s been there for years – the root causes are known – and sometimes it seems there is no cure.

That’s one way to think about the relations between Japan and South Korea, two countries that have a difficult relationship because of deep-seated issues related to Japan’s colonisation of Korea between 1910 and 1945. And it’s not just a diplomatic issue, the flare-ups have impacted trade, both economies, and the companies that do business there.

Things are looking up, however, now that South Korea has a new administration, led by President Yoon Suk-yeol. Taku Tamaki, Lecturer in International Relations at the UK’s Loughborough University, comments that under the previous administration, of Moon Jae-in, “things were pretty bad”. He points to a recent incident that is symptomatic of the wider issues: in early 2022 Japan made a bid for its gold and silver mines on Sado Island to be included in the UNESCO list of World Heritage Sites. This was met with uproar in South Korea, as it was deemed insensitive because the site was used for forced Korean labour.

As with the ongoing dispute, that pattern is the same. The Korean side feels aggrieved because Japan has not acknowledged any wrongdoing. Meanwhile Japan feels that the issue has been dealt with – they have made reparations – and Korea is unfairly painting Japan as the bad guy.

Now it seems the situation may be improving, and the frosty relations thawing. Eunil Cho, Associate Research Fellow at the Korea Institute for Defense Analyses and Lecturer in International Relations at Yonsei University in Seoul, says that both sides have the same purpose of improving relations. In recent years, she explains, South Korea-Japan relations “stalled in every aspect” and the Covid pandemic accelerated the impasse. “Because business, students, and others were unable to come and go due to COVID-19, a politically, economically and historically strained relationship was easily continued. But things are changing right now. And both political elites as well as both societies are ready to get back on track,” says Cho.

The spat between South Korea and Japan has a long history, and is rooted in Japan’s colonialisation period, in which it used forced Korean labour and ‘comfort women’ – Koreans who were forced into sexual slavery for the Japanese army. In 1965 an agreement was reached in which Japan paid millions in loans and grants. Whether this was compensation for wrongdoing or not is a major bone of contention. Korea argues that the 1965 agreement was signed under a dictatorship – without the consensus of the Korean victims – and the funds were for economic development, rather than compensation.

Lauren Richardson, Lecturer in the Department of International Relations and Director of the ANU Japan Institute at Australian National University, explains that the issue gained more prominence as South Korea democratised in the late 1980s. That was when various victims started to mobilise and seek redress. “In 1965 they had no voice and were not recognised,” says Richardson. “It’s been a long process,” she adds, explaining that they have been pursuing litigation for years now. And some of this has focused on challenging the basis of the 1965 agreement.

There have been various court cases. For example, in 1997 two forced labour victims took legal action against Nippon Steel Corporation, which went through various courts. The Japanese courts found that the company did not have liability for the old company that existed during the colonial era. Also, the South Korean lower courts threw out the claim. However, the higher courts in South Korea took a different view. In 2012 it was ruled that Japan’s colonisation was illegal and the 1965 agreement was to settle debt and establish economic ties between two countries – it did not cover reparations for Japan’s wrongdoing. In 2018, South Korea’s Supreme Court upheld this view, which triggered another flare-up in relations between the two countries.

Usually, a court ruling about your country in another country can be ignored, notes Richardson. But the litigation impacted Japanese companies that are doing business in South Korea because the courts made it possible to seize the assets of affected Japanese companies to compensate the victims. This prompted a “downward spiral” that effectively threw out the 1965 treaty, says Richardson.

Japan retaliated. It removed Korea from its list of top trading partners and put restrictions on chemicals, which would affect Korea’s production of chips and displays. Korea hit back and removed Japan from its favourite list of trading partners.

As it stands, there have been reports – for example, in the Asia Times – that the export of chemicals by Japan was not actually halted, and Korea’s chip production was not impacted.

Also, the assets of Japanese companies in Korea were not liquidated. However, they came pretty close to pressing that button, says Richardson. “[President] Moon was very close to toying with that idea – that would have been the point of no return.” As yet, Korea hasn’t taken that dramatic step. Throughout this period, both countries were preparing for the economic shock and were anticipating a hit to their economy as a result of the trade spat.

These days, however, the situation is looking rosier. Yoon took office in South Korea in May, and in the lead up to the new era, he had signalled that he wanted stronger bilateral relations with Japan.

Cho at Yonsei University comments that things are changing with the transition from the Moon to the Yoon administration and expects to see relations improve. “When President Yoon was the candidate for the presidency, one of his pledges in foreign policies was the normalisation of South Korea-Japan relations and paving the ground for developing future-oriented relationship,” she says. “Japan seems to recognise that the Yoon administration will try to improve Korea-Japan relations. This can be an opportunity to resolve the mismatch of perceptions of each other,” says Cho.

This is in line with Tamaki’s view of the new administration. He notes that Japan was paying close attention to the candidates in the run-up to the presidential election, and the conservative candidate – Yoon – had a softer stance towards Japan. “I think the Japanese government is happy the conservative President is in power,” says Tamaki. As for the state of diplomatic relations, he says, “I think there is scope for improvement,” adding that both sides have signalled they are willing to explore better ties.

There have been reports of friendlier relations, with envoys being dispatched to smooth things over. Ahead of Yoon’s inauguration there were reports that the Korean delegation wanted to “fasten the button of a new Korea-Japan relationship”, a reference to a saying that if the top button is done correctly, the others will fall in line.

Also, US President Joe Biden’s influence has been felt. He visited South Korea and Japan in May and has been keen to build alliances in the region. And the Asia Times reported that there were baby steps taken by Japan and Korea towards talks on the sidelines of the NATO summit at the end of June.

Richardson argues that the role of the United States is limited in this issue and its only leverage is as a security guarantor – in theory it could threaten to withdraw troops. However, “These disputes have nothing to do with security,” says Richardson. “This dispute means so much to the South Korean and the Japanese governments, and they will put this before security concerns,” says Richardson.

In 2019 when tensions escalated, and South Korea had been downgraded on the list of Japan’s trading partners, Richardson says that Korea was close to tearing up the military intelligence sharing agreement that it has with Japan. This didn’t happen, but Moon – the President at the time – was close to the brink.

Trade relations between the two countries now look better, however. Cho comments, “The current move to improve Korea-Japan relations from a broader perspective is certainly expected to catalyse bilateral trade relations.” In terms of trade relations, she explains, the two sides share the same concerns. “It is a trade dependence issue,” she explains. “As protectionism began and economic coercion took place, the countries began to think that excessive trade dependence on a country could increase vulnerability.”

Considering this, both countries have a need to diversify their trade and both countries have been participating in discussions in the US-led Indo-Pacific Economic Framework (IPEF). “I think there is room for improvement in South Korea-Japan trade relations in the process of forming new supply chains in the Asia Pacific region,” she says.

And all of this has an impact on the companies that do business in Korea and Japan. Cho says, “What has been painful for the companies that do business in either Korea or Japan is that a two-track approach of separating politics and the economy has not been followed in recent years. The bilaterally strained relations have been a critical factor in the deterioration of trade relations, but the Trump administrations’ American-first rhetoric and the US-China trade war also had an impact on destabilising trade in the Asia-Pacific region. Therefore, if the two governments are willing to pursue an improved relationship, it will be possible to reduce the burden on companies that want to stably develop their businesses there.”

At the moment, it is difficult to say what the outlook will be for companies, says Tamaki at Loughborough University. He notes that as the new administration begins, the prospects are quite positive. “There are good indications that the relationship will improve. It all depends on how the Japanese conservatives and ultra-conservatives behave over the next several months,” he notes. “Businesses are quite pragmatic,” says Tamaki. He comments that South Korean businesses and Japanese investors know what kind of things trigger public opinion and they feel optimistic about the current state of affairs. “Historically speaking, conservative Presidents do quite well – I think the Japanese side welcomes this change in administration,” Tamaki adds.

Looking to the future, Cho notes that it will be difficult for the relationship to be completely improved and the issues resolved. “What can be said at this point is that the Yoon government wants to improve Korea-Japan relations, and there is enough consensus with Japan’s Kishida government on that. It is expected that these political consultations will positively affect the improvement of the economic environment for the companies and businesses,” says Cho.

And while the relationship has been difficult, Richardson at ANU comments that this is something that had to happen. “The 1965 agreement was a very superficial level reconciliation – it did not set them up for the long term.” This treaty she says was like a “time bomb”. “It had to go off. It is messy, but the relationship will be better for it,” she comments, adding that the victims need to get their reckoning.

Although the relationship has been in an unhealthy condition, with occasional – yet serious flareups – the prognosis is more positive and there are hopes that the issues will eventually go into remission.

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