South Korea‘s president said on Wednesday that Japan’s export curbs on key materials used by South Korean technology firms could be prolonged and his government would sharply boost spending to help reduce their reliance on Japanese suppliers.
Japan said last week it would tighten restrictions on exports of three materials used in smartphone displays and chips, citing a dispute with Seoul over South Koreans forced to work for Japanese firms during World War Two.
The growing row threatens to disrupt supplies of chips and displays by South Korea’s tech giants Samsung Electronics and SK Hynix, which count Apple Inc and other smartphone makers as customers.
“We can’t rule out the possibility that the situation would be prolonged, despite our diplomatic efforts to resolve the issue,” President Moon Jae-in said at a meeting with executives from South Korea’s top 30 conglomerates.
“It is a very regrettable situation, but we have no choice but to prepare for all possibilities,” said Moon, adding that the government would sharply increase spending to help Korean firms source parts, materials and equipment domestically.
He also dismissed reported remarks by a politician in Japan that South Korea illegally shipped hydrogen fluoride imported from Japan to North Korea in violation of international sanctions, calling them “groundless”.
Hydrogen fluoride, a chemical covered by the Japanese export curbs, can be used in chemical weapons.
“It is not desirable at all … that Japan takes measures that deal a blow to our economy because of political purpose and makes remarks that link the measures to sanctions on North Korea,” Moon said.
South Korea’s bread-and-butter chip industry accounts for 20 percent of its exports.
“We will seek international cooperation as the measures will naturally have an adverse impact on the global economy,” he said.
The row shows no signs of abating, with Tokyo threatening last week to drop Seoul from a “white list” of countries with minimum trade restrictions, hitting the supply of a wider range of items used in weapons production.
Tokyo’s halt to preferential treatment of the three materials would force exporters to seek permission for each individual shipment to South Korea, taking around 90 days.
The dispute stems from Tokyo’s frustration at what it calls a lack of action by Seoul over a South Korean court ruling last October that ordered Nippon Steel to compensate former forced labourers.
Japan says the issue of forced labour was fully settled in 1965 when the neighbours restored diplomatic ties.
The neighbours share a bitter history dating to Japan’s colonisation of the Korean peninsula from 1910 to 1945, which saw forced use of labour by Japanese companies and the use of comfort women, a euphemism for girls and women, many of them Korean, forced to work in its wartime brothels.