The trade war. Relations between Japan and South Korea

Relations between Japan and South Korea have sharply deteriorated in early July. Since June 1, Japanese authorities have tightened exports to South Korea, that is necessary for the production of semiconductors and screens of various gadgets. Such a decision will hit first of all a number of high-tech companies in South Korea, including Samsung, SK Holdings, Hyundai Motor, POSCO, LG Electronics and many other companies in South Korea.

The cause for the dispute

It is worth noting that the enmity between Japan and South Korea bears in itself not so much a political character as the historical one, which is intensified by personal dislike. Thus, the reason for this dispute was the Korean court decision in the fall of 2018 about compensation to four former employees of a Japanese company, who were forcibly mobilized during World War II and forced to work at a Japanese enterprise. To this, the Japanese side replied that the question of compensation was resolved back in 1965 with the normalization of relations between Tokyo and Seoul.

The move of the dispute from the political into the civil domain

The tension in the society of these countries continues to be actively intensified despite the meetings and negotiations of Japan and South Korea officials. So, in both countries, radical views have increased dramatically. This caused a boycott of a number of products from Japan to South Korea. Similar actions were not long in coming for the Japanese population.

Economic consequences for the region

Thus, since the beginning of the month, the South Korean currency (South Korean won (KRW)) has come under noticeable pressure across the market. But, most importantly, the escalation of trade disputes between Japan and South Korea is largely putting pressure on stability in the Asian region.

Thus, amid the aggravation of these trade relations, the Japanese currency has noticeably lost in popularity. It couldn’t be said that it was under considerable pressure or lost the status of safe haven. Let us remind ourselves of the difficult trade situation between the United States and China. Maintaining tension between Japan and South Korea and the resumption of the US-Chinese trade war could cause a significant disruption in the economy. Undermining not only the Asian region, but also the Asia-Pacific region, which is a large part of economic geography. Not to mention the possible confrontation of the opposing sides, which can exacerbate tensions at times.

Anton Hanzenko