The year ended fairly quietly in Japan-Korea relations with no major events marking the last few months of 2008. Japan-North Korea relations remained stagnant and Japan-South Korea relations essentially ignored the Dokdo/Takeshima dispute, instead focusing on dealing with the widening global economic crisis. The biggest diplomatic event was the successful trilateral summit in December among China, Korea, and Japan, which may set the stage for further diplomatic movement. Whether 2009 will bring dramatic progress on these issues remains to be seen, but with new leaders in Japan and South Korea entering their first full years of rule, the continued concerns about the health of North Korea’s leader, and a new U.S. president, the new year holds the possibility for progress on at least some of these issues.

Japan-North Korea relations

The inauguration of Aso Taro as Japan’s new prime minister brought little change to Japan-North Korea relations. Despite a bilateral agreement made earlier this year that Pyongyang would reinvestigate the fate of the Japanese abductees in exchange for Tokyo’s partial lifting of the sanctions on the North, the last quarter of 2008 saw little progress on that front. In October, Tokyo extended its sanctions against Pyongyang for another six months and for the fourth time since 2006, citing the lack of progress on the abduction issue and Pyongyang’s nuclear development program. Throughout the quarter, North Korea reiterated its claim that Japan should not play any role in the Six-Party Talks, criticizing Tokyo’s refusal to fulfill its obligation to provide energy assistance to the North under the aid-for-denuclearization deal. Aso’s new administration continued to urge Pyongyang to move ahead with the reinvestigation of the abductees, but Tokyo’s request to hold a bilateral meeting on the sidelines of the December Six-Party Talks fell on deaf ears.

Aso and the U.S. removal of North Korea from the State Sponsors of Terrorism List

As expected, Prime Minister Aso continued a hard-line policy toward Pyongyang by refusing to provide energy and economic aid to the North as long as the abduction issue is left unresolved. Soon after the inauguration of the new government in late September 2008, Japan’s new Foreign Minister Nakasone Hirofumi confirmed that Japan’s position on North Korea “has not changed at all under the new administration” in a press conference on Sep. 30. Because Pyongyang had informed Tokyo that the re-launch of a committee that would reinvestigate the fate of the abductees would only follow a change in Japan’s North Korea policy, the result was a return to stalemate from the progress made during the Aug. 11-13 talks geared toward the normalization of bilateral ties. Against this backdrop, on Oct. 10, Japan extended its sanctions for another six months, including a ban on port calls by North Korean-registered vessels and a ban on all imports of goods from the North for the fourth time.

Apparently the timing of the U.S.’s delisting of Pyongyang from the State Sponsors of Terrorism List the next day surprised Tokyo. It was not just because Japanese officials and families of the abductees had lobbied the U.S. to keep Pyongyang on the list until it made progress on the abduction issue, but also because Aso was informed of the U.S. decision only 30 minutes before the announcement became public. Japanese media such as the Asahi Shimbun described it as “a blow to Prime Minister Aso,” and the Aso administration expressed its disapproval with the U.S. decision. In a meeting with U.S. Secretary of State Condoleezza Rice on Oct. 11, Finance Minister Nakagawa Shoichi called the move “very regrettable.” Families of the abductees expressed disappointment and “shock.” Responding to concerns that the U.S. decision would weaken the effectiveness of various sanction measures placed on Pyongyang, Aso argued instead that Tokyo’s leverage over Pyongyang was not affected.

After the U.S. decision to delist North Korea had reinvigorated efforts toward denuclearization, the Aso administration reiterated that there was no fundamental change in Tokyo’s stance, and that it would first seek progress in the abduction issue before making any economic and energy assistance to the North. On Oct. 14, before parliamentary deliberations, Aso stressed that he would maintain Japan’s basic stance of seeking normalization of bilateral ties in a comprehensive manner to ensure progress in all the areas of abduction, denuclearization, and missile issues. Chief Cabinet Secretary Kawamura Takeo, who heads Japan’s efforts on the abduction issue under the Aso administration, reconfirmed this basic policy by clarifying that there was no change in Japan’s position after the North’s removal from the U.S. terror list.

Meanwhile, North Korea continued its efforts to exclude Japan from the Six-Party Talks. In an Oct. 21 commentary, North Korea’s official daily Minju Joson blamed Japan for attempting to impede the denuclearization process and to use it as a pretext to bolster Japan’s military power and expansionist aims. According to Kyodo on Dec. 29, a senior North Korean diplomat warned that Pyongyang would suspend the disablement of its nuclear facilities unless Tokyo fulfilled its obligation to provide energy assistance under the Six-Party Talks agreement. Some observers saw this as a tactical move on North Korea’s part. Given that Australia voiced its willingness to provide aid to the North in Japan’s stead, it appears that Pyongyang is trying to drive a wedge in U.S.-Japan relations, knowing that the U.S. would want to proceed with the disablement. In response to Japan’s diplomatic efforts to present a human rights resolution against North Korea to the UN Committee on Human Rights, North Korea’s official Korean Central News Agency of DPRK Nov. 4 criticized Japan for its “intolerable violation” of North Korea’s sovereignty.

Inside Japan, various media organizations eagerly reported any speculation about North Korean leader Kim Jong-il’s health. On Oct. 18, the Yomiuri Shimbun reported that Pyongyang ordered its diplomats overseas to stay alert ahead of an upcoming announcement, which hinted at the possibility of Kim’s death. The next day, the Sankei Shimbun reported that Pyongyang was likely to impose a ban on foreign travelers to the country when the announcement was made. However, South Korea’s Unification Ministry spokesman Kim Ho-Nyoun said that nothing had been confirmed, and South Korean daily Choson Ilbo criticized Japan’s conservative media organizations on Oct. 20 for feeding “Kim Jong Il journalism,” spreading rumors of Kim’s death, and thereby generating unnecessary confusion about the stability of Northeast Asia.

The Six-Party Talks

Tokyo welcomed the resumption of the Six-Party Talks held in Beijing from Dec. 8-11, and asked Pyongyang to hold bilateral talks on the sidelines, but to no avail. Japan, South Korea, and the U.S. held a coordination meeting on Dec. 3 and agreed that verification measures must include sample testing of specific nuclear facilities, while Xinhua reported on Dec. 8 that North Korea had two objectives for the December talks: to ensure speedy economic compensation and  to achieve a common understanding on the issue of verification.

Unfortunately, the negotiations failed to produce an agreement on verification. North Korea rejected sample testing as a means of verifying its nuclear information, calling it an “infringement of its sovereignty.” The North said it would allow only field visits, checking of documents, and interviews with technicians as methods of verification, which was not acceptable to other parties. According to the South Korean daily Joongang Ilbo on Dec. 11, Japan was particularly vocal about meeting the condition that the draft agreements use clearer and less ambiguous language.

Japan-South Korea relations: “friends in need”

Even as the dispute over the Dokdo/Takeshima islets clouded bilateral relations, Seoul and Tokyo made major moves in their bilateral relations during this last quarter of 2008 through joint efforts to deal with the global financial crisis. Several high-level bilateral and trilateral meetings brought the two countries together, most notably the Seoul-Tokyo-Beijing trilateral summit held in Dazaifu, Fukuoka on Dec. 13. The three countries agreed to regularize their summit meeting and concluded a series of cooperation measures in the areas of currency swaps, North Korea’s nuclear development program, and climate change, among others. Finally, at President Lee’s invitation, Prime Minister Aso will visit South Korea in early 2009.

Aso-Lee meet to mend ties at ASEM

In a breakthrough from the suspended “shuttle diplomacy” that had stopped since July 2008 due to the dispute over the Dokdo/Takeshima islets, President Lee Myung-bak and Prime Minister Aso Taro met for the first time as heads of state on the sidelines of the Asia-Europe Meeting (ASEM) in Beijing on Oct. 24. Leaving behind the summer’s chilly mood, Lee and Aso revealed strong political will to repair ties between Seoul and Tokyo in the face of the global financial crisis, and promised to further strengthen bilateral relations through increased contacts between the leaders. During the 40-minutes meeting, Aso proposed to Lee that China, Korea, and Japan hold a summit, and Lee endorsed the proposal. Lee also extended an invitation to Aso to visit Seoul, which Aso accepted. They also agreed to work closely toward the denuclearization of North Korea, and Lee said that Pyongyang should address “the inhumane abduction issue.” Given that this meeting was intended to put bilateral relations back on normal footing, both leaders avoided mentioning difficult historical issues such as Dokdo/Takeshima.

In the wake of the successful summit, several bilateral meetings between high-ranking South Korean and Japanese officials followed throughout the quarter, further increasing bilateral cooperation. Another multilateral forum, the Asia-Pacific Economic Cooperation (APEC) meeting in Peru brought Foreign Ministers Nakasone and Yu Myung-hwan together on Nov. 20. During their first meeting as foreign ministers, Yu and Nakasone agreed to resume bilateral negotiations regarding a free-trade agreement (FTA). Seoul and Tokyo began the negotiations years ago, but they have been suspended since November 2004 after Japan refused South Korea’s demand to open Japan’s market to agricultural products. Since then, efforts to resume the negotiations have been derailed by the chilly political climate in Japan-South Korea relations, including the recent Dokdo/Takeshima issue. Regarding North Korea, the two foreign ministers agreed that verification measures on Pyongyang’s nuclear development program must be put in writing, and Yu promised that Seoul would “cooperate as much as possible” on Japan’s abduction issue. Later in December, the police chiefs of South Korea and Japan agreed to establish a hotline to promote cooperation in the area of cyber-crime.

Dokdo/Takeshima issue lingers

The year 2008 ended with no diplomatic breakthrough regarding the various historical issues that continue to plague Japan-Korea relations, as this quarter saw both sides repeatedly put forward their claims about the islets. On Oct. 3, the Japanese Cabinet defended a new handbook for middle-school education that claims the Dokdo/Takeshima islets are a part of Japanese territory; President Lee reiterated that his administration will not yield to Japan’s claim under any circumstances. Officials from South Korea’s North Gyeongsang Province invited foreign media to tour the islets, attend lectures on sovereignty issues and international law, and to view ancient maps at the Dokdo Museum on Ulleung Island.

According to the Dec. 17 Korea Times, Japanese web users coordinated a cyber-attack against the South Korean nonprofit group Voluntary Agency Network of Korea that advances South Korea’s claim on the islets. The Japanese government also distributed 23,500 copies of a pamphlet entitled “Ten Issues of Takeshima,” published in English, Korean, and Japanese. According to the Dec. 29 Donga Ilbo, Tokyo then published the pamphlet in seven other languages, including Chinese, French, Arabic, German, Portuguese, Russian, and Spanish, and plans to send 1,000 copies to each of its diplomatic missions. For those who are interested, the pamphlet is available on Japan’s Foreign Ministry website. South Korea sent a protest letter and requested that Japan remove the pamphlet from its website, while South Korea’s Foreign Ministry also responded by posting a document on its website with its own claims, available in 10 languages. In a rare move, according to a diplomatic source in Seoul, Tokyo’s decision not to mention the Dokdo/Takeshima islets in a high school teachers’ guidebook – which will be revised in early 2009 – seems intended not to hamper its relations with South Korea.

In early November, Japan’s Air Self-Defense Force Chief of Staff, Gen. Tamogami Toshio, was dismissed after it was revealed that he wrote an essay that attempted to legitimize Japan’s military actions before and during World War II. According to the Nov. 3 Asahi Shimbun, Tamogami argues in his essay that the Chinese government’s claim that Japan invaded China is false, and that Japan was a victim dragged into the war against China by Chiang Kai-shek. Defense Minister Hamada Yasukaza told reporters that it was “inappropriate for the chief of staff to make public an opinion that is clearly different from the Japanese government position.” South Korea’s Ministry of Foreign Affairs and Trade criticized former Gen. Tamogami’s attempt to distort history and urged Japan to repent for its wrongdoings and to learn from them. In China, deputy spokesman of the Foreign Ministry said in a statement that China was “shocked and angered” by Tamogami’s comments.

Looking ahead: the Dec. 13 trilateral summit

In contrast to the seemingly endless historical disputes, the highlight of the quarter was the Seoul-Tokyo-Beijing summit in December, which was held in Dazaifu, Fukuoka, an area symbolic of ancient historical ties between the three countries. The leaders of South Korea, Japan, and China – Lee, Aso, and Wen Jiabao – met for their first summit outside of the ASEAN Plus three setting, and agreed to “be the engine of growth to counter global financial turmoil.” The crisis-turned-opportunity trilateral summit was a notable, positive development in regional cooperation although the three countries have held eight summits so far in “separate rooms” on the sidelines of the ASEAN Plus Three. Triggered by the ever-growing level of interdependence among the three countries, the summit appears to pave the way for the continued integration of three economies, whose combined gross domestic product accounts for 16.7 percent of the world total.

Among the achievements of the summit, and probably most significant for its implications for the creation of a regional security structure in East Asia, the three agreed to hold a trilateral summit in Northeast Asia every year. Although it remains to be seen whether this will actually occur, an annual summit could signal the first step toward more multilateralism and institutionalization in Northeast Asia, especially if the current discussion in Washington about turning the Six-Party Talks into a permanent institution continues to move forward. Second, the three leaders agreed to expand their mutual currency swap deals to $30 billion each, and to begin a joint research program exploring possibilities for concluding a trilateral free trade agreement. Ahead of the meeting, Aso and Lee held a separate bilateral meeting and agreed to increase their own bilateral currency swap arrangement to the level of $20 billion. Third, the three leaders issued an “Action Plan for Promoting Trilateral Cooperation,” calling for trilateral cooperation in over 30 areas, including environmental protection, joint relief operations, and human exchanges. According to the Dec. 15 People’s Daily, the three countries will also launch an East Asia Climate Partnership Plan to cope with air pollution.

Although it is too early to tell how far the three countries can go in their “unity” with historical issues lingering over domestic politics and foreign relations, both Seoul and Tokyo saw the summit as a success and a meaningful step toward a more forward-looking stance. According to South Korean and Japanese media reports, Seoul and Tokyo are coordinating the timing of Aso’s visit to South Korea, which is likely to be early 2009.

Economic relations

In the face of the global financial crisis, South Korea, Japan, and China agreed to a number of measures aimed at coping with their own economic difficulties. Finance Ministers Kang Man-su, Nakagawa Shoichi, and Xie Xuren released a joint statement on Nov. 4 that they would hold more frequent talks on macroeconomic and financial policies and to expand their existing bilateral currency swap deals.

Both the South Korean and Japanese economies were under stress by the close of 2008. South Korean financial markets experienced a dollar shortage this year, as foreign investors took dollars out of South Korea to cope with losses at home due to the financial crisis. According to the Dec. 3 Choson Ilbo, during the third quarter of 2008, South Korea’s gross national income plunged to the lowest point since the Asian financial crisis in the late 1990s.

Japan, the world’s second largest economy, was also hit by the global financial crisis and slid into recession for the first time since 2002. According to a Japanese Cabinet announcement on Nov. 17, Japan’s GDP in the third quarter of 2008 contracted by 0.1 percent compared to the second quarter, which had already recorded -0.9 percent growth. Kyodo reported on Oct. 18 that 90 percent of locally renowned companies believed the Japanese economy was in a “recession phase.” In response, Prime Minister Aso announced a $275 billion stimulus package that includes $20 billion to be distributed in fixed-sums to every household in the country. The package is expected to expand loans to struggling small-and-medium-sized firms and includes a cut in payroll deductions for employment insurance.

In the area of international trade, eight Japanese car makers decided to reduce their production by a collective 700,000 cars until the year’s end. Nissan Motors alone announced that it would cut back production by 147,000 units, and also plans to lay off 1,500 non-regular workers. Sony is undergoing a large downsizing, laying off 8,000 temporary and contract workers. Sony also announced plans to shut down 10 percent of its 57 factories after its operating profit plunged 90 percent in the second quarter of 2008.

At the same time, South Korea’s annual trade deficit with Japan in 2008 again marked the record low of $30 billion (even without including the December totals.) According to the Dec. 22 Choson Ilbo, the record low deficit is the result of a 73 percent strengthening of the Japanese yen against the Korean won, prompted in large part because South Korea’s economy continues to depend on key Japanese technology for its own manufacturing. The Chosun Ilbo also reported on Nov. 25 that as the yen continued to rise against the won, South Korea’s small- and medium-sized businesses that had borrowed yen when the exchange rate was favorable were in danger of yet another financial crisis.

The weakening of the won and the rise of the yen’s value by 50 percent in just one year affected the tourism industry, attracting Japanese tourists to South Korea while curbing South Korean tourist visits to Japan. According to South Korea’s Busan Immigration Service, the number of South Korean tourists to Japan from Busan in September declined by 17 percent compared to the previous year, the first drop since 2003. On the other hand, the strong yen attracted more Japanese tourists to South Korea, accounting for a 12 percent increase compared to a year earlier.

The Dec. 9 Joongang Ilbo reported that the weak won did, however, provide some advantages to Korean export-oriented firms by making their goods relatively cheaper to purchase. However, according to a survey by the Korea Trade-Investment Promotion Agency, South Korean exporting companies were not benefiting as much from the depreciation of the won against the yen, as 15 out of 39 major Japanese companies that import from Korea have cut supply prices in consideration of Korean companies’ profit from the yen’s appreciation.

In another sign of increased integration of the economies in South Korea and Japan, South Korea’s port city Busan and Japan’s city of Fukuoka decided to form a supra-regional economic zone to bolster exchanges. The project was initiated in March, when Busan Mayor Hur Nam-sik visited Fukuoka and proposed economic bilateral cooperation, and Fukuoka accepted. Busan and Fukuoka play key roles in their respective countries’ automobile and heavy industries sectors. The Oct. 13 Choson Ilbo reported the two cities are scheduled to establish a council for economic cooperation to create closer links between their auto industries.

Society and culture

On Nov. 27, the Northeast Asian History Foundation announced the result of a survey conducted in October by the firm World Research, which explored South Korean, Japanese, and Chinese views on history. Some 93.6 percent of Chinese respondents said that they were proud of their country, followed by 89.4 percent of Japanese and 86.2 percent of South Korean respondents. Japan-South Korea relations were perceived as bad by 76.8 percent of South Korean respondents, which is up from 67.7 percent in 2007, compared to only 45.6 percent of Japanese respondents, up from 34.4 percent in 2007. Asked about history-related issues that need immediate attention for resolution, 85 percent of South Korean respondents said the Dokdo/Takeshima islets, while some 50 percent of Chinese respondents and 55.4 percent of Japanese respondents cited the distortion of facts in history textbooks. Among South Koreans, 96 percent were keenly aware of the Dokdo/Takeshima issue, which is up from 92.7 percent in 2007. Japanese interest in the issue dropped from 75.2 percent in 2007 to 67.8 percent in 2008.

The Japan Times on Dec. 6 reported that 388 South Korean atomic bomb survivors had filed lawsuits at district courts in Hiroshima, Osaka, and Nagasaki Prefectures to demand compensation for the psychological suffering they had endured caused by the Japanese government’s refusal to disburse health-care benefits to atomic-bomb survivors who live overseas. In 1974, Japan’s Ministry of Health and Welfare had issued guidance to local governments that limited health-care benefits to atomic bomb survivors living in Japan. In November 2007, the Japanese Supreme Court declared the 1974 guidance illegal.

On Nov. 14, Seoul’s City Council adopted a resolution urging Japan to return the Uigwe that had been looted by Japan’s colonial administration in 1922, and another resolution to set up an ad hoc committee to implement the resolution. The Uigwe is a collection of descriptions and illustrations on the preparations and processes of major events in the royal household and the government of the Chosun dynasty, and the Uigwe is enshrined in UNESCO’s Memory of the World Register along with the Choson Sillok. Japan returned 47 volumes of the Sillok in 2006, but it has not returned the Uigwe, which is currently in the Archives and Mausolea Department of Japan’s Imperial Household Agency, located in the Imperial Palace in Tokyo.

The coming quarter

The coming quarter holds the potential for continued improvement of relations between Tokyo and Seoul. The financial crisis will likely be the focus of policymakers throughout the world, and Northeast Asia is no exception. As the economies of Japan and South Korea continue to slide in recession and the approval ratings of both Lee and Aso remain mired in the low 20s, the chance for dramatic moves on secondary issues is unlikely. However, the coming quarter could see Prime Minster Aso’s first visit to South Korea for a summit with President Lee. The economic crisis also provides the opportunity for the two sides to further institutionalize working relations in a number of economic areas, from trade and finance to visas and legal issues.

Regarding Japan-North Korea relations, much will depend on the pace and content of the Obama administration’s policy toward the North. If, as expected, the Obama administration continues to pursue a denuclearization policy working within the Six-Party Talks framework, Japan will face a difficult choice about whether and how much to participate in the discussion and implementation of agreements that are reached. Similarly, it will put Japan in an awkward situation, where the domestic priority of solving the abductee issue first may run counter to the Obama administration’s goal of solving the nuclear issue first. Whether and how this is resolved will have a strong influence on how and whether Japan-North Korea relations progress.