(Bloomberg) -- Japan is ready to explain to South Korea export curbs it applied to materials vital to its neighbor’s tech industry, as their dispute stemming from Japan’s colonial rule stoked worries about global supply chains for semiconductors and computer displays.
Trade Minster Hiroshige Seko on Tuesday told reporters Japan is open to working-level talks but has no intention of withdrawing the measures put in place last week on three specialist materials. Tokyo will be watching how Seoul acts, he said, with a newspaper in Japan and South Korea saying talks could come as early as this week.
“We believe this really depends on South Korea’s response. There is of course a possibility the current restrictions will tighten, but if export controls are firmly managed, things may also loosen. Both are possible,” he said when asked if Japan was considering additional measures.
The dispute has moved into the economic arena their dispute over what the two see as proper contrition for Japan’s 1910-1945 rule over the Korean Peninsula. Past fights have mostly kept industries on both sides out of the fray but the worry now is that tensions between the major trading partners and U.S. allies could spiral out of control.
While the stricter checks that took effect Thursday don’t amount to a ban, exporters would be required to obtain a separate license each time they want to sell the materials to South Korea, causing delays. Japan is also considering removing South Korea from a list of trusted export markets, a move that could affect a broader swath of products.
The new restrictions could hurt the profits of South Korean firms that rely on Japanese suppliers, such as Samsung Electronics (KS:005930) Co. and LG Display Co. Japan has 90% of the market for chips used in smartphone displays as well as the etching gas used to make chips. Unless the dispute gets settled, South Korean firms will have to find alternative supplies from Taiwan and China, while Japanese manufacturers will need to divert their production.
The U.S. has traditionally stepped in when tensions have become heated between two of Asia’s largest economies as they all confront security threats from North Korea and the ever-expanding shadow of China’s military in the region. In a sign that the fight has caught Washington’s attention, the U.S. expressed its continued commitment to strengthening ties with South Korea and Japan amid the fight on export curbs, Yonhap News of South Korea reported Tuesday, citing an unidentified U.S. State Department official.
South Korea’s Trade Minister Yoo Myung-hee will likely visit the U.S. this month, the ministry’s spokesman Park Ki-young said in a regular briefing Monday. A senior South Korean trade official will have talks in Washington later this week about the economic cooperation between South Korea and the U.S. Yonhap said they are also likely to discuss various other issues, including the ongoing trade spat with Japan.
Tokyo contends that South Korea started the latest dispute when its courts last year ruled that Japanese companies must compensate Koreans conscripted to work in factories and mines for Japan’s imperial war machine.
