Japan and South Korea trade tit-for-tat export blows

Protesters hold signs during an anti-Japan rally in front of the Japanese embassy in Seoul, South Korea,The sign reads "NO Abe". (Reuters Photo)

Japan and South Korea rescinded each other's favoured export partner status on Friday and Seoul said it would review a military information agreement, as a long-running row between the US allies hit a new low.

The two countries both democracies and market economies -- are mired in long-running disputes over the use of forced labour during World War II.

Tokyo, which made the first move despite the US calls for both to calm tensions, insisted it was acting on national security grounds rather than retaliation.

"The government at a cabinet meeting today approved a revision to the export control law", Japan's Trade Minister Hiroshige Seko told reporters, referring to a so-called "white list".

"South Korea, the only Asian nation on the list, will be removed."

South Korean President Moon Jae-in called the move "very reckless", warning that "responsibility for what is going to happen next also lies squarely with the Japanese government".

"We will never again lose to Japan," he added.

Hours later his finance minister, Hong Nam-ki, announced Seoul would reciprocate.

Tokyo's decision "fundamentally destroys the relations of trust and cooperation that the two countries established", Hong said.

The moves mean hundreds of products that could be diverted to military use will be subject to tighter export controls in both directions.

Soon afterwards the dispute spread into the two countries' security relationship as a Seoul security official said the South would reassess a military information-sharing agreement.

The South would review whether "it is indeed appropriate to continue to maintain the sharing of sensitive military intelligence with a country that raises questions towards us about lack of trust and security issues," said Kim Hyun-Chong of the National Security Office.

Seoul and Tokyo face common geopolitical threats from the nuclear-armed North and an ever more assertive China.

But their relations have been strained for decades as a result of Tokyo's brutal 1910-45 colonial rule over the Korean peninsula.

Politicians on both sides exploit the issue for domestic political purposes, according to analysts.

And a string of South Korean court rulings ordering Japanese companies to compensate forced labour victims has infuriated Japan, which argues the issue was resolved when the two countries normalised ties in 1965.

In remarks to a cabinet meeting called at short notice and televised live, South Korea's Moon said Tokyo had embarked on a "selfish, destructive act that will cripple the global supply chain and wreak havoc on the global economy".

"If Japan -- even though it has great economic strength -- attempts to harm our economy, the Korean government also has countermeasures with which to respond," he said, threatening to inflict "significant damage".

Some experts said the effect of Tokyo's export decision would be more symbolic than economic, with Nomura Securities senior economist Hajime Yoshimoto saying it would have "only have a limited impact on the South Korean economy".

Many major Japanese exporters already have special permission, to ship to non-white-list countries with simplified procedures, according to the trade ministry.

But Mun Byung-ki of the Korea International Trade Association said the auto and consumer electronics industries were likely to be among many sectors affected.

In the case of OLED display panels used in smartphones and televisions, among other devices, he said the restrictions "will affect companies outside of South Korea and Japan, as Korean firms -- LG Display and Samsung Electronics -- are key players in the global market".

Tokyo had already tightened rules last month on exports of three products key to South Korea's chip and smartphone industries, raising fears for global supply in the sectors.

Seko insisted the moves did not amount to an export embargo and would not affect global supply chains.

Japanese officials say South Korea has repeatedly violated the rules governing sensitive exports and the moves are necessary for "national security."

The row has alarmed Washington and US Secretary of State Mike Pompeo held trilateral talks with his Japanese and South Korean counterparts, Taro Kono and Kang Kyung-Wha, Friday on the sidelines of the ASEAN summit in Bangkok.

The brief meeting appeared have been frosty as the trio -- with Pompeo in the middle -- did not speak or shake hands when they posed for photos afterwards.

But a senior US State Department official put a positive spin on the meeting, saying: "The fact that we met, the fact that you saw all three parties there means there is interest, of course, in finding a solution to this, or at least resolution".

Separately, Seoul's foreign ministry said its vice-minister had summoned Japan's ambassador and told him that the citizens of the South can no longer consider Tokyo a "friendly nation".

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