Japan approves export to S. Korea amid row

It allows high-tech material shipment for first time since imposing curbs, but issues warning

SEOUL/TOKYO • Japan has approved shipment of a high-tech material to South Korea for the first time since imposing export curbs last month, but doubled down on political pressure and warned it could broaden restrictions on deliveries to its Asian neighbour.

The approval and subsequent warning illustrate how Tokyo is ready to up the ante in the diplomatic row and yet unwilling to fully cut off exports to South Korea.

The dispute, rooted in their wartime past and exacerbated by the recent tightening of curbs on shipments of three high-tech components, has stoked nationalism and raised trade concerns.

Japanese Industry Minister Hiroshige Seko said at a briefing: "Usually, we don't announce each time we give export permission. However, the South Korean government has referred to our moves as an embargo on exports, which is unfair criticism."

It is the first time since the export curbs were introduced last month that Japan has allowed shipment of one of the three high-tech materials, he said.

He was quick to add that Tokyo would expand the curbs beyond the three specialised chemicals - fluorinated polyimides, photoresists and hydrogen fluoride - if there were any cases of "improper" use. Some of the chemicals, which are used to make smartphone displays and chips, can also be used in weapons.

Japanese officials have cited unspecified security reasons for their export curbs but have pointed to an erosion of trust after South Korean court rulings last year ordered Japanese firms to compensate wartime forced labourers. Tokyo says the matter was settled by a 1965 treaty normalising bilateral ties.

South Korea president Moon Jae-in said yesterday that tighter curbs would undermine Japan's international credibility and accused Tokyo of using its industrial advantage as a weapon against another country.

"Even if there are any gains, it will be short-lived. In the end, it is a game without winners, where everyone, including Japan itself, becomes a victim," Mr Moon said.

 
 
 

The high-tech material that has just been cleared by Japan for export is EUV photoresists, said South Korean Prime Minister Lee Nak-yon. The chemical is crucial for Samsung's advanced contract chipmaking production. Samsung declined to comment.

But it remains unclear if this approval from Tokyo signals a breakthrough in trade relations. "They approved only one out of a number of items," a South Korean senior Trade Ministry official pointed out.

A presidential official said: "It doesn't mean that uncertainties have been completely removed for the other items."

Japan has removed South Korea from the "white list" of countries with fast-track trade status, meaning some exporters may have to go through a lengthy permit application process to ship restricted items.

South Korea, which was scheduled to take a call on a plan to drop Japan from its white list yesterday, has, however, put off the decision until further discussions.

But the country has said it plans to tighten regulations on imported coal ashes, mostly from Japan and used to produce cement, and has proposed tax benefits for local firms in case they need to buy foreign chemical makers as Seoul tries to cut down reliance on Japan.

South Korea's national security council meeting took place yesterday, and members agreed to review measures to deal with Japan's "retaliatory" actions, but continue to try to resolve the issue via dialogue, the presidential office said.

The export curbs highlight how Japan controls a vital link in the global supply chain. It remains a major player in specialised chip components, even though it was overtaken as a chipmaker years ago by South Korea.

At a New York event for a new flagship phone launch, the head of Samsung's mobile division told reporters that he could not rule out a potential impact on the supply chain for smartphone production if the curbs dragged on for more than four months.

South Korean chipmakers are hitting a dead end in their quest to find alternatives for key Japanese materials that have been slapped with restrictions, raising the prospect of major disruption to their operations in the coming months.

REUTERS

 
A version of this article appeared in the print edition of The Straits Times on August 09, 2019, with the headline 'Japan approves export to S. Korea amid row'. Print Edition | Subscribe