Worsening Korea-Japan relations could torpedo the economy

The bilateral relations between Seoul and Tokyo, which have hit the rock bottom, are having an impact on the economy, going beyond diplomacy. While there have been some clashes between the two countries either for political or diplomatic reasons, the tacit rule has been kept that politics and the economy must be separated. Yet, the two neighboring countries are witnessing this rule on the verge of breaking down.

Following the indefinite postponement of the meeting between the heads of chamber of commerce last year, the KJE (Korea Japan Economic Association) meeting previously slated for May this year has been postponed after September. In addition, Nissan, a Japanese automaker, announced its plan to cut the number of OEM products signed with the Renault Samsung Motors’ factory in Busan from 80,000 to 60,000 until September. On the surface, union strikes and lower productivity were the reasons cited by Nissan, but many experts say the decision reflects the low ebb of relations between Korea and Japan. To make matters worse, some Japanese politicians are even mulling an economic retaliation against South Korea. During a meeting on last Wednesday convened by members of the Liberal Democratic Party, the ruling party of Japan, one of the participants proposed to impose economic sanctions to deal a heavy blow to the Korean economy even if doing so affects Japanese businesses.

And the next day, March 28, President Moon Jae-in attended a meeting with foreign investors and argued that “economic exchanges must be perceived different than politics,” calling on the participants to maintain “amicable relationship between companies” while admitting to the ever-worsening relations between Seoul and Tokyo. However, it is a pipe dream to hope for a closer economic cooperation when the diplomatic relationship is eroding day by day. One must not forget that in Japan, the government, politics, and the economy work dovetailed with each other, and the recent issues such as reparations for forced laborers or property seizing wield an impact both direct and indirect on Japanese companies.

As of last year, the volume of bilateral trade between Korea and Japan reached 85.2 billion dollars (roughly 110 trillion won). The biggest victims of worsening economic relations are none other than the businessmen and the workers in both countries. Amidst the prolonged trade war between Beijing and Washington, economic cooperation is more important than ever, but Korea and Japan are going in the opposite direction. What triggered today’s economic woes was politics, and therefore, it is politicians who must untangle the imbroglio. Businessmen in Seoul and Tokyo also must urge politicians to stop exploiting the bilateral relations to advance their political ends, and they must open a channel for dialogue first.