SEOUL/TOKYO, Aug 2: Japan said on Friday it would remove South Korea’s fast-track export status, drawing the threat of a firm response from Seoul and further straining relations already stressed by a dispute over compensation for wartime forced laborers.

South Korea will become the first country to be removed from Japan’s “white list” of fast-track export destinations when the decision, approved by Japan’s cabinet on Friday, goes into effect on Aug.28.

The measure could require Japanese exporters to South Korea to take extra administrative procedures to obtain export permits, potentially slowing down exports of a wide range of goods that could be used to produce weapons.

Industry Minister Hiroshige Seko told a briefing after the cabinet meeting that the decision was taken for national security reasons, and was not intended to harm bilateral relations.

But South Korean officials held a different perspective, especially as Japan last tightened curbs on exports to South Korea of three high-tech materials needed to make memory chips and display panels, threatening the global supply of chips.

South Korean President Moon Jae-in will chair a cabinet meeting later on Friday to discuss Japan’s stance, his office said.

Foreign Minister Kang Kyung-wha said Japan was acting in a “unilateral and arbitrary manner”. Seoul has repeatedly protested Japan’s actions, especially after the tightening on curbs of high-tech materials last month.

“We’re gravely concerned by the decision to say the least, this coming in particular in footsteps of earlier decision that restricts some key export items to Korea,” Kang said during a regional meeting in Bangkok.

TRUST DEFICIT

While Japan has said that move was based on national security, and not political, it has also highlighted what it says is an erosion of trust after South Korean court rulings ordered Japanese firms compensate wartime forced laborers.

“We are in a situation where we cannot hold a dialogue with trust,” Industry Minister Hiroshige Seko told a briefing.

“We want South Korea to first create an environment in which we can have dialogue with trust. It’s South Korea’s responsibility to do that.”

Tokyo says that issue of compensation was settled by a 1965 treaty that normalized ties between the two countries.

The rift is the latest example of how a decades-old disagreement has undermined relations between the two U.S. allies, at a time when Washington wants them working closely together on North Korea. It also awkward economically, as both export driven economies are facing sliding demand from China.

South Korea would be the first country to be removed from Japan’s white list, which currently has 27 countries including Germany, Britain and the United States.

SENSITIVITIES

Seko said Japan was unwilling to hold a dialogue until South Korea corrected a statement made at a July meeting between bureaucrats of the two countries.

Japan has disputed a Korean official’s comment that Seoul asked Japan to repeal the export curbs at that July meeting. Tokyo has also accused South Korea of breaking an agreement on what the two sides would disclose from the meeting.

South Korean officials, for their part, have warned they may reconsider an intelligence sharing accord with Japan if the feud worsens.

The United States has urged its two key Asian allies to consider reaching a “standstill agreement” to buy more time for talks, a senior U.S. administration official told reporters in Washington on Tuesday.

U.S. Secretary of State Mike Pompeo said on Thursday he hoped the two would find a solution by themselves, stressing cooperation on North Korea was “incredibly important”. Seko said Japan had briefed the U.S. administration on its plans.

The fresh restrictions could deal an additional blow to South Korean chipmakers, which are already scrambling to secure key chipmaking materials after last month’s export curbs.

South Korea’s top imports from Japan by value last year were semiconductor components and equipment ranging from silicon wafers to chip etching machines, according to data provided by Korea International Trade Association.

In 2018, South Korea bought a total $11 billion worth of semiconductor parts and equipment from Japan, accounting for nearly 20% of Japanese imports, the data shows.

 
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