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Japan and South Korea are set to meet in Tokyo for their first face-to-face discussions over Japanese export controls implemented last week, a move that threatens business ties between the two U.S. allies.
The working-level talks are set for 2 p.m. Friday, when Japan has said it intends to explain -- but not negotiate -- the curbs on specialty materials vital to South Korea’s tech giants. Tokyo has also said it was preparing to remove South Korea from a list of what are known as “white countries” that are treated as trusted export markets, a move that could come later this month.
The talks will be held at Japan’s Ministry of Economy, Trade and Industry and include on the Japan’s side the trade control manager from the ministry’s trade and economic cooperation bureau, as well as a security trade control manager. The South Korean team will be led by a director of the trade ministry’s export control policy division.
The Japanese restrictions have led to growing South Korean calls for a boycott of Japanese goods, which appears to be already hitting clothing giant Fast Retailing Co. and other companies. Takeshi Okazaki, chief financial officer for the Uniqlo owner, said Thursday the dispute was starting to hurt sales in South Korea.
The Japanese measures have escalated a long-running diplomatic feud over Japan’s 1910-45 colonial rule over the Korean Peninsula into a global economic concern. Past fights have mostly kept industries on both sides out of the fray but the worry now is that tensions could spiral out of control.
While the stricter checks don’t amount to a ban, licenses would be required for each contract to export the materials needed to make semiconductors and displays to South Korea, causing delays. There have been no indications yet that the moves have had any major impact on firms reliant on the materials such as Samsung Electronics (KS:005930) Co. and LG Display Co.
Decades of mistrust make it difficult for Japanese Prime Minister Shinzo Abe and South Korean President Moon Jae-in to retreat from their budding trade feud. A series of looming deadlines, including a Japanese upper house election on July 21, are only raising the political pressure on both men, who can’t afford to look weak dealing with disagreements rooted in the shared history of the neighbors.
The Trump administration, which has so far said little publicly on the dispute, could have an opportunity to weigh in as new Assistant Secretary of State for East Asian and Pacific Affairs David Stilwell arrived Thursday in Tokyo and is scheduled to go to South Korea on July 17.