Overcome Japan

Seoul must take corresponding steps quickly

After Japan tightened export restrictions on South Korea, Friday, by removing it from a list of countries enjoying simplified export procedures for a broad range of industrial materials, the country is considering corresponding measures in all sectors with a deep sense of crisis.

Japan's unilateral steps will have serious ramifications for bilateral relations, and the future of the two countries. For Seoul, this is viewed as the biggest challenge from Tokyo since its occupation of Korea ended in 1945 following its defeat in World War II.

Given Prime Minister Shinzo Abe's Japan is taking steps to rewrite his country's pacifist Constitution to enable the Japanese military to participate in overseas conflicts, and apparently using tensions with Seoul to achieve that goal, it is hard to expect Japan to change its course anytime soon. We should rather brace for Japan's next measures because this could only be the beginning of Abe's deliberate "Korea bashing" linked to his political ambitions.

Industry-wise, however, the Japanese measures will surely cause problems for domestic enterprises and a possible disruption of their supply of goods to global markets. In the long term, however, the ongoing dispute can be an opportunity for Korea Inc. to reduce its reliance on Japan in terms of imports of key industrial materials and become a more resilient, diversified economy.

That, of course, does not mean the Japanese measures are justifiable. Tokyo has begun a trade war without cause against Seoul in apparent retaliation against the Korean Supreme Court's ruling that Japanese firms must pay compensation to Korean workers forced to work for them during World War II. Japan cited possible security risks as the prime reason for its export restrictions on South Korea, but has not provided persuasive proof.

On Friday, the National Assembly passed a 5.83 trillion-won ($4.9 billion) supplementary budget to support the government's efforts to prop up the slowing economy and tackle Japan's export curbs against Seoul. The budget bill included 273 billion won set aside to tackle the Japanese measures.

According to the Financial Services Commission, Korean firms damaged by the Japanese measures will get fresh loans of 6 trillion won. They will also get a one-year extension of maturity for any outstanding loans and export payment guarantees affected by the restrictions.

In a sense, Japan's export restrictions will serve as a "growing pain" for the South Korean economy. President Moon Jaein was right when he vowed full support for localizing key industrial materials and technologies that the country has imported from Japan, and to diversify import sources for these materials.

It is time for Korea to nurture the country's materials and parts industries, which are relatively weak given its economic size. Also, Korean firms should find alternative suppliers of the restricted goods from China, Russia and other countries.