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A person walks through the Line offices. (courtesy of Japan’s Line HR blog)

The Japanese government said that recent administrative directives asking the operator of the Line messaging service to reconsider its capital relationship with Naver, which holds a 50% stake in the company, were in fact “requests to reinforce safety management measures and to reconsider security governance.”

Japanese Chief Cabinet Secretary Yoshimasa Hayashi made the statement about the administrative directives, which were issued by the Ministry of Internal Affairs and Communications, during the daily press conference on Tuesday. Hayashi was responding to a reporter who had mentioned Korean press reports characterizing the directives as discriminatory treatment and an attempt to push a Korean company out of the Japanese market.

“After a serious security incident occurred at LY Corp.  — namely, the leak of information, including telecommunications secrets — the Ministry of Internal Affairs and Communications issued an administrative directive on March 5 requesting that thorough measures be taken to prevent the recurrence of such an incident and to safeguard users’ interests,” Hayashi said in the press conference.

“While there are various ways to go about reconsidering security governance, what’s important, regardless of the company being from any particular country, is to appropriately manage the companies hired to perform various services,” he added.

Hayashi was reiterating Tokyo’s position that even though the Ministry of Internal Affairs and Communications issued two administrative directives “to secure cybersecurity and protect telecommunications secrets” to LY Corp. on March 5 and April 16, the original goal was not reconsidering its capital relationship with Naver but rather strengthening security measures.

But because the administrative directives from the Ministry of Internal Affairs and Communications mentioned “reconsidering the capital relationship with Naver,” it triggered pushback both from Naver and from the Korean government.

Significantly, Naver CEO Choi Soo-yeon addressed the issue as follows in a May 3 earnings call for the first quarter. “While it’s highly unusual for the Japanese Ministry of Internal Affairs and Communications to ask us to reduce our capital control in administrative directives, we’re not going to make a decision about whether to comply. We’re instead carrying out an internal review of what decision to make based on our mid- and long-term business plans.”

The Japanese government has responded by reiterating that the original objective of the administrative directive was not to nab management rights from Naver. 

Naver and SoftBank each hold a 50% stake in A Holdings, the majority shareholder in LY Corp., which operates Line and Yahoo! Japan. But revelations that SoftBank had begun work on attempting to buy some of Naver’s stock in LY amid the multiple administrative directives from the Japanese ministry has only fueled further speculation about the future of Line. 

But in the press conference, Hayashi once again affirmed that “by bringing in highly specialized talent, technology, ample resources and funds, investment in Japan has sparked innovation and brought economic vitality to the countryside, strengthening the growth of the Japanese economy as a whole and contributing to the revitalization of local economies.”

The cabinet secretary went on to say that there has been “no change in the position of the Japanese government that it promotes investment in Japan by foreign companies, including Korean ones.” 

He also underscored that Korea is an “important neighboring country” and that “close exchanges on a variety of fields and matters are underway between the governments of Japan and Korea,” stating that if the need arises, Japan would courteously clarify the situation to their Korean counterparts. 

By Hong Seok-jae, staff reporter

Please direct questions or comments to [english@hani.co.kr]