17.January.2020 – Korea and Japan

The lesser known trade war between Korea and Japan has implications


Everyone knows that there is a prolonged trade war going on between US and China. What is lesser known, however, is that there is another trade war going on between Japan and South Korea.

The two countries have been embroiled over a plethora of disputes historically. Not surprisingly, such trade disputes have caused large disruptions in the global supply chain, as the two world’s largest producers of electronics and semi-conductors have refused to cooperate in trade together.

On 1st of July 2019, Japanese government removed South Korea from the so-called “white list”, a list of preferred trading partners that do not need to get approval for certain export materials. In particular, Japan announced that it would tighten the export of chemicals that are critical for the South Korean semiconductor industry.


In response, South Korea also removed Japan from its list of most trusted trading partners on 18th of September, 2019. While recently Japan has eased some of its exports restrictions, South Koreans have boycotted Japanese made
products and campaigned for “No Japan”, which resulted in plummeting sales figures of some of famous Japanese brands, such as UNIQLO and Asahi beer.

Rather than analysing reasons as to why a trade war is going on, which would easily take up hundreds of pages explaining, the history, culture and economics surrounding the relationship between Japan and South Korea, this article tries to pinpoint quantitatively what has been happening, and whether it is likely for these two countries can afford to h​ave a trade war in the long run.

Japan exports to South Korea from 2018
Source: Japan Ministry of Finance
Notes: (1) unit in Japanese Yen, (2) Categories are indexed 100 on 1/1/2018

According to statistics released by Japan Ministry of Finance, total amount of exports to South Korea has decreased about 19% since the beginning of 2018, while total amount of imports from South Korea has decreased about 7% in the same time period.

On a more granular level, while different categories shows us varying degrees of fluctuations, Japanese export items such as non-electronic machinery and domestic electric equipment have decreased significantly. However, food and direct consumable category has witnessed the largest drop since the trade friction started.

My interpretation of data is that while supplies of critical electronic parts to South Korea has been negatively affected to an extent, the more direct pain has been felt in the consumable sector such as beer and apparels, which has been boycotted by the Koreans more easily than boycotting sophisticated electronic components that are difficult to be replaced in the short term.

Japan imports from South Korea from 2018
Source: Japan Ministry of Finance
Notes: (1) unit in Japanese Yen, (2) Categories are indexed 100 on 1/1/2018

In contrast, statistics on imports of South Korean goods from Japan do not show any significant change as it is difficult to find any influence of trade frictions in the import figures, in turn the total amount of imports has not decreased that much at all. Such contrasting two sets of data demonstrates that South Korea’s response to trade has been much more vehement.

Number of tourists between Japan and South Korea
Source: Japan Tourism Agency and Korea Tourism Organization

In tourism, Koreans calls for “No Japan” has worked effectively. Korea used to be the single largest group of travelers coming to Japan, but its number plummeted in the last few months decreasing about 68% between June to
Such dramatic drop in number of Korean travelers to Japan is evident in other industries as well, such as the decline in stock prices in the aviation industry in South Korea.

However, what is interesting is that Japan seems unaffected, as the number of travelers going to South Korea has rather increased or remained stable. It is well known that a large population of Japanese people are uninterested in political sensitivities. Japanese’s younger generations in particular holds quite a favorable view on South Korea, thanks to a wave of K-pops and Korean dramas.

Overall, the statistics available on exports, imports and tourism show that Koreans have been responding fiercely as they have been boycotting Japanese goods and tour products to an extent that may cause some economic damages to
the Japanese economy, whereas Japan seems immune from such controversy.

Would a trade-war between Japan and South Korea progress, just like US and China?

The answer to this question seems to hinge on whether South Koreans are going to be less hostile, but right now the numbers show that they are not going to be any time soon.


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