Japan imposes new trade restrictions with South Korea.

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Last Friday, Japan increased export controls on a greater variety of products to South Korea, furthering the two nations into a trade war. The increased controls was in the form of removing South Korea from a “white list” of countires that face less restrictions for importing senstivie technology. Removing South Korea from the white list occurs on August 28th.

In response, South Korea’s President said they would also remove Japan from their own white list. This trade war worries Washington as both sides have threatened to withdraw from an intelligence-sharing deal that would hurt the US’ efforts to partner with South Korea and Japan in dealing with North Korea. Secretary of State Mike Pompeo, South Korea’s foreign minister and Japan’s foreign minister are expected to meet this upcoming Friday in Bangkok.

Japan claims the new export restrictions are not unique to South Korea and not retaliation for the recent South Korean court ruling ordering Japanese companies to pay victims of forced labor during Japan’s colonial occupation of South Korea. The Japanese claimed countries like Taiwan and China will also be subject to export controls. Japan also claims any delays in getting export approval will not be long – even though export approvals for last month’s banned chemicals have yet to be approved.

Will post any updates as soon as the meeting ends on Friday.

Japan and South Korea trade war tensions rise.

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Japan and South Korea trade war tensions rise.

As previously mentioned on this blog, Japan and South Korea are in a trade dispute arising out of a court case granting South Koreans compensation for forced-labor during Japan’s colonial occupation of South Korea.

In response, Japan placed export regulations on chemicals exported to South Korea that are vital for South Korea’s tech industry. The restrictions on exports to South Korea are to take place in August unless an agreement is reached between the two sides. It appears no deal will be reached as both politicians have seen their approval ratings rise since the disputes.

Japan claims national security threat the reason for limiting exports of chemicals to South Korea.

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On July 1st, the Japanese government began restricting exports of two chemicals, fluorinated polyimide and hydrogen fluoride; chemicals needed to produce semiconductors and smartphone and television screens. South Korea is dependent on Japan for this supply. Japanese officials claim the chemicals are “controlled items” (goods with civilian and military applications), and have been “inadequately managed” by South Korean companies.

However, South Korean officials believe the real motive for restricting imports of the two checmicals is a political dispute between the two countries and a recent South Korean court ruling that resulted in the seizing of assets of a Japanese company to pay for reparations for Japan’s actions during World War II.

Japanese exporters of the chemicals now need a license for each one with delays taking up to 90 days. In the meantime, South Korean companies are looking for new suppliers even though stockpiles of the checmicals are enough to meet the current demand.

As in most disputes between two nations, the citizens (well, businesses) lose, South Korean companies can’t purchase the chemicals they want and Japanese companies can’t sell the chemicals they don’t need.

South Korea and Japan – next trade war?

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“Boycott Japan” logo, source: Twitter user: sydbris

Back in May of this year, a South Korean court sided with Korean wartime laborers to be compensated for their forced labor during Japan’s occupation of the Korean Peninsula. The court ordered seizure of assets belonging to Nippon Steel and Nachi-Fujikoshi to pay compensation to wartime laborers during 1910 to 1945.

In early July, Japanese Prime Minister Shinzo Abe’s government announced the restrictions on sales to South Korea of materials necessary to produce vital components in high-tech manufacturing. The restrictions include three products: (1) fluorinated polyimides, used in smartphone displays; (2) photoresists, used to transfer circuit patterns on to semiconductor wafers; and (3) hydrogen fluoride, used as an etching gas when making chips.

Prime Minister Abe has denied the export controls are retailiation for the seizing of assets, but the netizens on both sides are battling it out online.

For example, the #BoycottJapan is trending in South Korea with South Korean netizens proposing South Korean alternatives to popular Japanese brands. Some South Koreans are posting their cancellation confirmations of previously arranged trips to Japan. In addition to individuals, the Korean Supermarkets Alliance, an organization representing more than 23,000 stores, said it would temporarily halt sales of Japanese products, including beers by Asahi and Kirin Holdings Co., and Japan Tobacco Inc.’s Mild Seven cigarettes.

Will be interesting to see what happens next.

Maybe the US courts can also do something – I’m still waiting for Japan to atone for their slaughter of civilian men, women, children in China and throughout Asia, the forced human trafficking of women to be used as “comfort women” and the killing of prisoners of war from the US, Australia, New Zealand and the rest of the world. Not holding my breath my breath though – one can only hope Japan gets payback for the pain and agony they caused the world.

Taiwan to cut tariffs on sake and Japan farm and fishery products as it looks to join TPP.

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According to the Japan Times, in an effort to join the Trans-Pacific Partnership multilateral free trade pact (formerly the Trans-Pacific Partnership), Taiwan will lower its tariffs on Japanese sake from 40% to 20% along with reductions in tariffs for Japanese farm and fishery products. The reduction in tariffs is to demonstrate Taiwan’s commitment for free trade.

While open to free trade, Taiwan still does not allow imports from five Japanese prefectures impacted by the Fukushima nuclear power station crisis that occurred in 2011.

Will post any updates if and when Taiwan is admitted to the TPP.

Japan proposes cutting U.S. farm tariffs to TPP levels.

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During last week’s bilateral trade talks between the US and Japan, Japan proposed reducing tariffs on U.S. agricultural products to the current levels for TPP members.

This would have the impact helping American farmers and ranchers whose imports have become less competitive in the Japanese market compared to their Australian and Canadian counterparts who are part of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (previously known as the Trans-Pacific Partnership).

However, this reduction in agricultural tariffs would require the US to remove US import taxes on Japanese automobiles and vehicle parts.

The two countries met for two days last week but no firm agreement was reached.

Japan and US set for bilateral trade talks in mid-April.

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The US and Japan will hold trade talks on April 15 and 16 in Washington as part of President Trump’s campaign promise for fair and reciprocal trade. Trump will most likely work on resolving the large trade deficit with Japan.

The US would like to see increase US beef exports while Japan said the trade talks will only cover goods only and not agriculture.

It will be interesting to see how the talks proceed – Japan is already a party to the 11-member agreement formerly known as the Trans Pacific Partnership along with an economic partnership agreement with the EU.

US and Japan will negotiate a free trade agreement.

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During the UN meeting this week, the US and Japan agreed on Wednesday to negotiate a separate bilateral trade agreement between the two countries. While Japan is part of the Trans Pacific Partnership, the agreement by Japan to negotiate may be an effort to avoid the risk of tariffs on Japanese goods to the US – especially automobiles. This agreement to negotiate is a shift from Japanese economic policy as in the past Japan has not expressed interest in talking to the US.