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South Korea removed Japan from its list of most trusted trading partners, the latest sign of unraveling ties between two U.S. allies mired in a series of disputes.
The change means that exports of some strategic goods to Japan will receive greater scrutiny than shipments to 28 other fast-track destinations, South Korea's trade ministry said early Wednesday in a statement.
The move comes after Japan last month cut South Korea from a so-called “white list” of nations it deems safe for export of strategic materials. South Korea also plans to terminate a U.S.-endorsed intelligence-sharing pact with Japan and has filed a complaint with the World Trade Organization against its neighbor for imposing tighter export controls on materials key to tech manufacturing.
Trade Flows Favor Japan as Tensions With Korea Heat Up: Charts
The trade tensions have hurt South Korea's economic outlook as some of the country's major companies rely on materials from Japan to make products such as memory chips and displays. The escalated tension bodes ill for the economies already struggling amid weak global demand and the U.S.-China trade war.
Japan's exports to South Korea fell 9.4% in August, compared with a year earlier, while exports of chip making equipment to its neighbor fell almost 40%.
The dispute stems largely from differences in perception as to whether Japan has shown sufficient contrition for its 1910-45 colonization of the Korean Peninsula. Last year, the South Korean Supreme Court ruled in favor of individuals seeking compensation from Japanese firms for forced labor during the colonial era. Japan says the ruling violates a 1965 treaty between the two governments.
In the statement, South Korea's trade ministry said the revision is to improve the country's control of strategic material exports, and is not a retaliation against Japan. It said the country has notified Japan of the changes, and explained the background of the revisions through various routes.
Isshu Sugawara, Japan's trade minister, issued a statement saying it was regrettable that South Korea had taken the measure without providing a proper explanation.
“The Trade Ministry will continue to urge the South Korean trade authorities to fulfill their responsibility to explain this to the international community,” he said.
To contact the reporter on this story: Sam Kim in Seoul at skim609@bloomberg.net
To contact the editors responsible for this story: Malcolm Scott at mscott23@bloomberg.net, Jiyeun Lee, Jason Clenfield
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