Japan’s image as economic leader has been tarnished, US think tanks says

CSIS says Tokyo is compromising is its own broader interests with S. Korea trade dispute

Japan’s image as an economic leader has been tainted due to its trade spat with Korea, and Tokyo needs to review its special responsibility, US-based think tank Center for International and Strategic Studies (CSIS) said on Aug. 6.

In a report titled “Japan and Korea: Rising Above the Fray,” CSIS Senior Vice President Matthew Goodman said Japan has stepped up as an economic leader in the Asian region by “filling a void left by the United States,” but added, “Unfortunately, Japan’s strategic gains are now at risk because of its escalating dispute with South Korea over history and trade.”

While noting that Japan has removed Korea from a white list of preferred trading partners and Korea has seen a series of boycotts of Japanese products, Goodman said Japan might feel that Korea’s response to its actions is “exaggerated.”

However, the report said, “The timing of the initial decision — coming shortly after Japan rejected a Korean proposal for a joint compensation fund and shortly before Japan’s Upper House elections in mid-July — does feed suspicions that the move was political.”

“But even if motivated by genuine and pressing national security concerns, the action is likely to do damage to Japan’s broader interests,” it said. “Not only has Japan’s image as an economic leader been tarnished by the dust-up with its neighbor, but the prospect that South Korea will join Japanese-led initiatives has been greatly diminished.”

First, on the economic front, Goodman warned that the bilateral “tit-for-tat retaliation” could not only hurt the semiconductor sector in South Korea and consumer products in Japan but also have a domino effect on the global economy. He added that South Korea-Japan cooperation could be hindered in responding to security threats from North Korea, China, and Russia.

On Japan’s economic diplomacy in the region, the report said that, given the US decision to withdraw from the Trans-Pacific Partnership, Tokyo has taken the lead within Asia in “data free flow” but that Seoul is unlikely to take part in this initiative.

“It is in the strong interest of both Tokyo and Seoul to step back and avoid further escalating their dispute. They should agree to immediate working-level talks on the concerns underlying Japan’s export-control decisions,” Goodman said.

“As long as Seoul is engaging in those talks in a constructive manner, Tokyo should suspend implementation of the measures. Meanwhile, the Moon government should also agree to international arbitration over the historical forced-labor issue, as the Abe administration has proposed.”

By Hwang Joon-bum, Washington correspondent

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