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By Kang Seung-woo
Already-deteriorating relations between Korea and Japan are about to go further downhill as the deadline approaches for a court-ordered liquidation of Japanese firms' assets to provide compensation to wartime forced labor victims.
While the Japanese government is mulling "retaliation" in the event of the sale of the assets, it is not expected that Seoul and Tokyo will compromise and reach an agreement anytime soon, with their leaders looking unlikely to budge.
A major trigger for the diplomatic row was Japanese Prime Minister Shinzo Abe's abrupt July 2019 decision to tighten its control on exports of three key industrial materials critical for Korea's chip and display industries in apparent retaliation over the Korean Supreme Court's ruling on forced labor in 2018.
Although the court ordered Japanese steelmakers Nippon Steel and Sumitomo Metal to pay 100 million won ($83,000) in compensation to each of four Koreans for their forced labor, they ignored the order and as a result, the Pohang branch of Daegu District Court began the process of liquidating their Korean assets in June. Should there be no response from the companies by Aug. 4, the court can liquidate their assets.
Along with the trade curbs, Japan also removed Korea from its list of preferred trading partners.
"The possible liquidation of Japanese corporate assets over the wartime forced labor issue is a ticking time bomb under Korea-Japan relations," said Leif-Eric Easley, an associate professor of international studies at Ewha Womans University.
"Despite political difficulties, Seoul should defuse the situation before it sets off a chain reaction. Otherwise, Tokyo will almost certainly retaliate in ways that damage economies already struggling because of COVID-19."
According to Japan's Kyodo News, July 26, the Japanese government has begun to consider retaliatory measures if the court orders the property of the accused companies to be sold.
"It has become an option to tighten visa requirements for Korea and temporarily recalling the ambassador to Korea," it reported, citing government sources. Japan is also expected to retaliate through tariff hikes or seizing Korean assets in Japan.
The possible retaliation is in line with Japan's consistent claims that the 1965 normalization treaty between the two countries settled the individual compensation issues, and nothing further is owed.
Easley advised the government to find a creative domestic compensation mechanism that respects court rulings and Korea's 1965 treaty with Japan.
"Then Tokyo will come under international pressure to restore Seoul's trusted trade partner status," he said.
The forced labor issue-triggered rift has expanded to the international stage.
Trade Minister Yoo Myung-hee is running for the director-general post of the World Trade Organization (WTO), seeking to become its first female chief, but her bid may fall through due to opposition from Japan. The position needs unanimous approval from all WTO members.
Although Yoo was confident about Japan's support during her press conference in Geneva in early July, there are many negative views toward her within the Japanese government due to her strong criticism of the country's export control measures, according to media outlets there.
Another Kyodo report said earlier that Yoo has criticized Japan's export controls, so the Japanese government will support either Ngozi Okonjo-Iweala from Nigeria or Amina Mohamed from Kenya, both of whom are also female candidates.
"We will closely watch the future trend toward her obtaining support," it added.
In addition, Korea reopened its complaint with the WTO in June after Japan remained unresponsive to its repeated requests to lift the measures. On July 29, the WTO decided to set up a panel to look into the complaint.
"The Trump administration should encourage reconciliation so the U.S. allies can return to cooperation on immediate challenges posed by North Korea and long-term challenges posed by China," Easley added.
