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South Korean President Moon Jae-in moves along after shaking hands with Japanese Prime Minister Shinzo Abe during the G20 Osaka summit on June 28.

South Korean President Moon Jae-in didn’t end up holding a summit with Japanese Prime Minister Shinzo Abe while Moon was visiting Osaka for the G20 summit. While that wasn’t unexpected, considering that a high-ranking official at the Blue House said on June 25 that there wouldn’t be a summit between the two countries, bilateral relations remain tense after Japan has effectively decided on going through with economic retribution against South Korea.

Moon and Abe’s interaction was limited to a handshake and eye contact when they met during the official welcome ceremony and the formal dinner for leaders held after the summit kicked off on June 28. Reports indicate that neither Moon nor Abe offered any gestures expressing warmth. While they were standing in front of reporters at the official welcome ceremony, they parted ways after only shaking hands for eight seconds. By the time of the South Korea-Canada summit, which was the final event during Moon’s stay in Japan, he still hadn’t held a separate meeting with Abe.

South Korea and Japan appear to have continued discussions on a summit between Moon and Abe until the last possible minute. South Korean Foreign Minister Kang Kyung-wha and Japanese Foreign Minister Taro Kono held a separate meeting around 9 pm on June 28, after the dinner banquet for top diplomats from the G20 countries, during which they exchanged opinions about Korean Peninsula affairs and South Korea-Japan relations. But Kang and Kono were apparently unable to surmount the tension produced by the continuing dispute over the South Korean Supreme Court’s ruling awarding damages to the victims of forced labor during the Japanese colonial occupation and subsequent incidents, including a Japanese patrol plane’s close flyby over a South Korean naval vessel and Seoul’s restrictions on seafood imports from Fukushima.

Since South Korea and Japan failed to reach a breakthrough during the G20 summit in Osaka, the chill between them is predicted to continue for the time being. Amid these developments, right-leaning Japanese newspaper the Sankei Shimbun reported that the Japanese government has decided to adjust its policy for managing exports to South Korea and that on July 4 it will impose export controls on a total of three products: namely, fluorine polyimides, which are used as parts in OLED (organic light-emitting diode) displays, and photoresist and etching gas (high-purity hydrogen fluoride), which are both essential to the semiconductor manufacturing process.

While all three of these items can be applied to military ends, the Japanese government has previously given preferential treatment to South Korea by allowing exports to be expedited, the Sankei Shimbun explained. As of July 4, the Japanese government will be requiring approval for each individual export contract. The newspaper interpreted this measure as effectively constituting retaliation for the lawsuits claiming damages for forced labor.

If the Japanese government does implement such economic retaliation, South Korean display and semiconductor factories are sure to be impacted. Although there are some South Korean companies (including Kolon Life Science, SK Innovation, and SoulBrain) supplying such products, they don’t produce enough to replace Japanese semiconductor materials and devices, which account for about 70% of South Korean demand. Japan, which is a dominant producer of semiconductor materials, reportedly controls 70% of the market in these three product categories (high-purity hydrogen fluoride, photosensitive resin, and fluorine polyimides).

“We’re making an effort to diversify our suppliers, but the fact is that South Korean companies can’t match the technological prowess of Japanese companies,” said a source in the semiconductor industry.

“This won’t have a big impact on us because we have large domestic partners such as Kolon Life Science, but we do use a considerable number of parts imported from Japan in certain processes,” said a source in the display industry.

The Japanese Ministry of Economy, Trade and Industry officially announced the implementation of the retaliatory measures on July 1, confirming they will go into effect starting July 4.

Some think the Japanese government is pushing through these retaliatory measures because of the upcoming election for members of the House of Councillors, scheduled for July 21. The measures could push South Korea-Japan relations into a downward spiral. During an appearance before the South Korean National Assembly’s Foreign Affairs and Unification Committee on June 25, South Korean Foreign Minister Kang Kyung-wha said that Seoul “can’t just sit there” while Japan goes ahead with retaliatory measures.

By Cho Ki-weon, Tokyo correspondent, and Shin Da-eun and Park Min-hee, staff reporters

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