South Korea Warns Japan Trade Move Could Hurt Security Ties

(Bloomberg) -- Japan's plan to remove South Korea from a list of trusted export destinations would have a grave impact that could hurt security ties between the two U.S. allies, Seoul's top diplomat said.

South Korean Foreign Minister Kang Kyung-wha spoke Thursday after meeting her Japanese counterpart Taro Kono for their first face-to-face talks since Tokyo announced last month it was tightening monitoring of exports of three specialty materials vital to its Asian neighbor's technology sector. Japan also soon plans to introduce stricter checks on a far wider range of exports.

“We cannot help but see this as affecting the framework of security cooperation between South Korea and Japan,” Kang told reporters in Bangkok after the meeting on the sidelines of a regional forum. Kono told Kang he wanted South Korea to change its stance on a separate dispute over compensation for conscripted Korean laborers during the colonial period, Kyodo News reported.

Both ministers looked grim as they headed into their discussions that came after the U.S. called on the neighbors to ease rising friction that is threatening business and security cooperation. U.S. Secretary of State Michael Pompeo told reporters en route to the Association of Southeast Asian Nations gathering in Thailand that he would encourage the two countries “to find a path forward.”

North Korea reminded the region of the shared threat it poses Wednesday, when it conducted what the South Korean military said was its second short-range ballistic missile test in a week.

Global Stakes

Long-fraught ties between Japan and South Korea have turned increasingly sour in recent months, potentially hampering their ability to work together to counter threats from North Korea and China. Much of the ill will relates to whether Japan has shown sufficient contrition for its 1910-45 occupation of the Korean Peninsula.

Two Japanese cabinet ministers said Wednesday that there was no change to the plan to remove South Korea from the so-called “white list” of countries that are considered trusted export destinations. Japan did not change its position in the foreign ministers' meeting, the Yonhap News Agency reported, citing South Korea's foreign ministry.

Japan Eyes New Weapon in Trade Fight With South Korea

No date has been announced for the official cabinet approval of the decision, but domestic media have said it was expected Friday, which would allow it to come into force by the end of the month. Such a move could restrict exports on hundreds of items to South Korea, hamstringing the country's giant tech sector and potentially the production of a swathe of the world's most popular gadgets.

Five of America's largest tech industry groups wrote a joint letter to the trade ministers of Japan and South Korea to cool tensions, saying too much was at stake globally. A senior U.S. official said Tuesday that the U.S. was urging South Korea and Japan to reach a “standstill agreement,” to allow more time to negotiate.

A senior South Korean government official who asked not to be identified said removal from Japan's white list would probably mean the country's economy grows less than forecast this year. Still, Japanese officials argue that the changes wouldn't have much long-term effect on legitimate exports.

--With assistance from Shinhye Kang.

To contact the reporters on this story: Isabel Reynolds in Tokyo at ireynolds1@bloomberg.net;Jihye Lee in Seoul at jlee2352@bloomberg.net

To contact the editors responsible for this story: Brendan Scott at bscott66@bloomberg.net, Jon Herskovitz

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