The last four months of 2011 were dominated by two leadership changes – the mid-December death of Kim Jong Il after 17 years as North Korea’s leader and the election of Noda Yoshihiko in September as Japan’s sixth prime minister in the last five years. Kim’s death is a watershed event that could mean changes in North Korea’s domestic and foreign policies with repercussions around the region. South Korea and Japan reacted cautiously to the news of Kim’s death and the rise of his son, Kim Jong Un, as the “Great Successor” and new leader of North Korea. Beyond this event, however, Korea-Japan relations showed little change. Early indications suggest that Noda will maintain the foreign policy direction of his predecessors. Economic relations between South Korea and Japan – and indeed between Korea, Japan, and China – continue to move slowly forward as they continue to build financial and trade relations and institutions that will facilitate greater openness and interactions. Politically, Seoul and Tokyo remain firmly stuck arguing the same issues that have aggravated relations for decades. North Korea-Japan relations also showed little change in late 2011 as both sides repeated the usual accusations and demanded they make amends, but neither showed any inclination to do so. Meanwhile, there were three main trends in relations. First, external forces drove state behavior as evidenced by the almost domino-like efforts at free trade agreements (FTA) in both South Korea and Japan. Second, there was growing recognition of the high (and seemingly insurmountable) domestic political costs associated with non-pliable issues such as the comfort women/sex slaves. Third, there was a growing realization that change could mean opportunity as embodied in the cautious desire in both Seoul and Tokyo to shape the contours of the post-Kim Jong Il landscape in North Korea.

South Korea-Japan – the action-reaction game and economic relations

There were three general and inter-related external trends that sparked a reaction in relations: the Korea-US Free Trade Agreement (KORUS FTA), the Eurozone crisis, and the aftermath of the March “triple disaster” in Japan. There was perhaps no better way to demonstrate and inculcate the perils of becoming a “laggard” in economic liberalization than the successful yet painful ratification of the KORUS FTA in both the US House of Representatives and Senate in October as well as the ROK National Assembly in November. In fact, Yonhap reported that on Sept. 16, Japanese Ambassador Muto Masatoshi called for a resumption of bilateral free trade talks between Seoul and Tokyo claiming that such a deal “will play a significant role in mapping out rules to help the two sides lead the global market.” Talks have been stalled since late 2004 over disagreement over tariffs on agricultural goods and fisheries. A few days after Muto’s remarks, President Lee Myung-bak and Prime Minister Noda Yoshihiko met for the first time since Noda’s inauguration in early September against the backdrop of the United Nations General Assembly; again, there were references to hopes of progress being made on discussions of free trade between the two countries. The implications of the KORUS FTA for Japan were not lost on those that would be most hard-hit: Hiromasa Yonekura, chairman of the Japan Business Federation (Keidanren), remarked at a press conference on Oct. 11 that, “Japan will inevitably face a disadvantage,” citing the double noose of the KORUS FTA and the deal struck between South Korea and the European Union, which came into effect in July 2011. By late November, a joint statement was issued by the South Korea-Japan Parliamentarians’ Union at the end of their 35^th meeting, calling for their governments to make progress on a formal economic partnership.

Japan got its sixth prime minister in five years in early September when Yoshihiko Noda was confirmed by the Diet. Early indications are that Noda will continue the policies of his predecessors – a focus on the US-Japan alliance and domestic policy, especially rebuilding and recovering from the Great East Japan earthquake. In regional economic relations, whether the momentum of South Korea’s free trade agreements directly influenced Japan’s decision to begin discussions on the Trans-Pacific Partnership in November – hailed by some as Noda’s “Nixon to China Moment” – is difficult to assess. However, the overriding sensitivity toward relative gains on the part of Japan was apparent. A Sept. 18 Nikkei Weekly editorial titled “TPP Talks Offer Fleeting Chance to Revive Japan” urged Tokyo to focus on foreign perceptions in conjunction with the risk of pandering to domestic agricultural interests that could fashion Japan’s image as an “untrustworthy economic partner.” The prospect of the US-led TPP initiative was tied to the impacts on a similar trilateral mechanism among Japan, Korea, and China, as well as the ramifications for closer Europe-Asia cooperation. More explicitly, an Oct. 21 Yomiuri Shimbun editorial stated flat out that “South Korea began seriously considering the EPA [Economic Partnership Agreement] with Japan again apparently because Japan is looking at entering talks on the Trans-Pacific Partnership economic partnership framework.” Thus, while Korea was under the impression that its own initiatives were the reference point for a reactive Japan, Japan was also assuming that its own efforts were carving out the space for policy maneuverability by Korea. In the end, the actions may have increased both countries’ leverage with China as Beijing voiced its desire to open full negotiations on a free trade agreement with the two countries in 2012. One could speculate that the parallel movement of Seoul and Tokyo toward greater economic liberalization seemingly conjured a bad word for China: “containment.” The Dec. 13 Asahi Shimbun quoted Li Xiangyang, director of the Institute of Asia-Pacific Studies at the Chinese Academy of Social Sciences, describing the TPP as a “warning to a fast-growing China,” adding that “the United States has come to Asia to drink the nectar of its economic growth by having Japan get involved.”

Another ‘c’ word that gained greater reception in Korea-Japan relations was “currency swap.” Seoul and Tokyo agreed on Oct. 19, to increase their currency swap arrangement from $13 billion (1 trillion yen) to $70 billion effective until October 2012. More specifically, the initial $3 billion arrangement between the Bank of Korea and the Bank of Japan will be increased to $30 billion, while a similar deal between the Bank of Korea and the Finance Ministry will reach $40 billion from the initial $10 billion. The decision came from the same Lee-Noda summit that promised renewed efforts at a potential bilateral FTA and amidst unrelenting media coverage in both countries about the Eurozone crisis. In response to possible contagion effects, President Lee remarked at the post-summit joint news conference that “We [Korea and Japan] agreed that it is important to strengthen currency cooperation in order to preemptively stabilize financial markets amid deepening uncertainties in the global economy.” AFP was quick to note that Noda had “sweetened” the mood during his first bilateral trip by returning five volumes of historic royal Korean books that had been seized during Japan’s colonial rule from 1910-45. Only one week later, the Korea Times reported on Oct. 26, that Korea had struck a three-year deal with China to also expand their won-yuan swap line to $56 billion to secure foreign exchange liquidity against the volatile global financial situation.

Finally, the March 2011 disaster that ravaged Japan had continuing effects on the Korea-Japan bilateral relationship. The Nov. 29 Mainichi Daily News reported that Seoul and Tokyo held their first working-level meeting to consolidate cooperation in procuring liquefied natural gas and other related issues. The move came as a result of increasing global demand for LNG combined with Japan’s own need to gain resources for thermal power generation following the nuclear disaster at the Fukushima Daiichi power plant. The sheer potential behind such cooperation is immense when considering that Japan is the world’s largest importer of LNG, while Korea ranks second, with the two accounting for roughly half (46 percent) of total global LNG imports in 2010. This pact was reinforced by the December approval of Japan’s bilateral civil nuclear cooperation accords with Jordan, Vietnam, South Korea, and Russia, by both the House of Representatives and the House of Councillors, which would pave the way for exports of civilian nuclear technology by Japan. Earlier, the Nov. 30 Mainichi Daily News announced a trilateral accord among Korea, Japan, and China that would facilitate information sharing on accidents and other safety matters regarding nuclear power plants.

Perhaps as a consequence of the dynamic inter-mingling of bilateral issues and the multiple watchful games of action-reaction, the Korea-Japan relationship has been somewhat enveloped by a larger trilateral framework involving China. The official launch of the Trilateral Cooperative Secretariat in Seoul on Sept. 27 marked the emerging momentum toward greater regional cooperation. The Korea Herald pointed out the pragmatism of reducing transaction costs through centralizing operations for the three countries. Among 17 ministerial conferences and 50 official dialogues, the South Korean Foreign Ministry, together with the Sejong Institute and Chosun Ilbo, co-hosted a Korea-Japan-China academic conference in Seoul on Oct. 19 to commemorate the formal launch of the secretariat. The event was titled, ‘Toward a New Era of Peace and Common Prosperity in Northeast Asia,” bringing together dignitaries such as former ROK Prime Minister Lee Hong-gu, former Japanese Prime Minister Hatoyama Yukio, and China’s former State Councilor Tang Jiaxuan. The momentum carried over to October, when Yonhap reported that South Korea, Japan, and China each signed an agreement with the 10 Southeast Asian countries to set aside 150,000 tons of rice each year from its national reserve for emergency aid. According to the ASEAN Plus 3 Emergency Rice Reserve (APTERR) system, the recipients will have a total of 787,000 tons of rice earmarked annually to help stabilize grain prices, especially during natural disasters. The report further stated that the three donors will each provide $1 million over five years to construct a $3 million operational fund for the system, along with an additional $75,000 each year toward operational costs for the headquarters. Thus, the latter months of 2011 were marked by a general mood of constructive engagement and regional cooperation.

Insurmountable domestic political costs

Below the surface of a well-greased engine of inter-state relations (further bolstered by the dynamic of the trilateral mechanism), however, Seoul and Tokyo could not completely evade their own domestic constituencies and the more familiar issues plaguing their relations. The issue of compensation for Korean comfort women or sex slaves by Japan quickly became Seoul’s unwavering talking point during negotiations with Tokyo.

The issue received increased attention in late August when the South Korean Constitutional Court ruled that Seoul’s failure to make efforts to negotiate individual compensation claims with Tokyo was unconstitutional. On Sept. 1, Yonhap reported that the South Korean Foreign Ministry had called in Kanehara Nobukatsu, Japan’s deputy chief of mission in Seoul, to relay the Court’s ruling and request “sincere and active” measures by Japan. The rest of September was littered with reports of Seoul’s intentions to engage Japan on the issue, until on Sept. 29, the Korea Times announced that the Korean Foreign Ministry had set up a special task force to specifically deal with the matter of compensation due to Japan’s reticence to accept Korea’s Sept. 15 proposal to hold bilateral talks regarding the comfort women. Shortly thereafter, Yonhap referred to remarks by Sugiyama Shinsuke, director-general of the Japanese Foreign Ministry’s Asian and Oceanian Affairs Bureau, to express Japan’s position that the formal stance of the Japanese government was that the compensation issue had been “fully and completely resolved” under the bilateral normalization treaty of 1965.

Meanwhile, the Mainichi Daily News continued coverage of Seoul’s plans for the islands of Dokdo/Takeshima, reporting that Ambassador Muto had lodged a protest to South Korea’s First Vice Foreign Minister Park Suk-hwan on Nov. 11 over a visit by South Korean lawmakers to the islets for a musical concert. The orchestral concert, which apparently attracted an audience of roughly 500, was intended to reaffirm Korea’s territorial rights and raise the spirits of the Coast Guard personnel keeping watch on the island. Moreover, reports surfaced in late November that Seoul had plans to truly incorporate Dokdo/Takeshima as Korea’s possession by spending 400 billion won ($344.4 million) by 2016 to transform the islets into an underwater wonderland to galvanize tourism and increase general access. According to the Chosun Ilbo, Seoul had plans to install a 210-meter-long breakwater, an underwater park with a viewing chamber, and a 200-meter road connecting the east to the west islets.

While Seoul was announcing its extravagant plans for conspicuous consumption and development of the islets, Tokyo’s concerns lay with a more humbling issue of the comfort women. Specifically, the spat started when the Korean Council for Women Drafted for Military Sexual Slavery by Japan – a group representing the victims of sexual enslavement and in charge of demonstrations every Wednesday in front of the Japanese Embassy in Seoul – announced plans in September to unveil a “Peace Monument” in December to commemorate their 1,000^th  demonstration. In response, Tokyo asked Seoul to block such moves on multiple occasions, right up until the Lee-Noda summit on Dec. 18, 2011 in Kyoto. In fact, much of the coverage from the Japanese media honed in on the fact that a disproportionate amount of time was spent on the comfort women/sex slave issue.  A Dec. 19 Asahi Shimbun editorial was brusque in its tone in accusing President Lee of having derailed Japan’s efforts to “steer bilateral relations to a more neighborly footing,” despite Japan having “pulled out all the stops” to prevent potential friction. According to the editorial, Tokyo also tried to “lighten the atmosphere by presenting a birthday cake for Lee, who turned 70 on Dec. 19, at a dinner party on Dec. 17.” Nevertheless, phrases to describe Lee spanned from “uncompromising,” to “pandering to domestic voters ahead of the presidential election,” to “not giving an inch.” Similarly, a Dec. 18 Mainichi Daily News editorial was quick to note that almost 40 minutes of the hour-long meeting was devoted to the issue of the comfort women/sex slaves. The editorial also mentioned that then Chief Cabinet Secretary Kono Yohei had apologized for the sexual servitude back in 1993, while donations from the Asian Women’s Fund – a Japan-led initiative to compensate the victims of sexual servitude and later disbanded in 2007 – had been rejected by most of the victims and in fact, served as a target for criticism that perhaps the Japanese government was trying to shirk responsibility at the state level.

The blame game aside, the reality is that the window for atonement is closing. As President Lee announced during his mid-December trip to Tokyo, in 2011 alone, 16 of the victims of sexual slavery had passed away – leaving only 63 living. Territory is typically more enduring than human beings, making the comfort women/sex slaves a more exigent point of contention than Dokdo/Takeshima.

North Korea-Japan relations: strike while the iron is hot

North Korea’s usual demands for apologies, repenting, and settlement of past crimes from Japan marked the beginning of this reporting period. A Sept. 7 Korean Central News Agency (KCNA) article argued that a potential name change from the “East Sea” to the “Sea of Japan” would be most unreasonable and a Sept. 20 article lambasted Japan for its past colonial rule on the Korean Peninsula. The Nov. 25 Rodong Sinmun also carried an article citing the follies of the Greater East Asia Co-Prosperity Sphere and the need for Tokyo to repent and pay compensation for its colonial rule or become “a sworn enemy of the Korean people.”

Beginning in October, the wrangling centered on a North Korean demand for payment of $5.7 billion for the failed initiative of the light-water reactor project spearheaded by the Korean Peninsula Energy Development Organization (KEDO) – an international consortium involving South Korea, Japan, and the US, which suspended its activities in 2006 over concerns regarding North Korea’s nuclear weapons proliferation. According to Yonhap, Seoul (the main benefactor of the KEDO initiative) has yet to repay a $1.1 billion (1.3 trillion won) loan and added interest, while the interest on government bonds issued to cover the debt has ballooned to more than 900 billion won. Shortly thereafter, the Nov. 14 Chosun Ilbo reported that KEDO had demanded that North Korea pay $1.89 billion for the losses incurred by its breach of the agreement.

In a rare occurrence, Japanese authorities discovered nine North Korean defectors in a vessel off the western coast of Japan near the Noto Peninsula in mid-September. On the issue of North Korea defectors, the Nov. 9 Mainichi Daily News quoted a statement by Chief Cabinet Secretary Fujimura Osamu that Tokyo will continue to protect DPRK defectors currently residing in China, from a humanitarian standpoint. However, once news of the death of Kim Jong Il on Dec. 17 officially exploded on to the airwaves two days later, speculation regarding the implications of regime succession and general geopolitical stability set the tone for future coverage and swamped any discussion of refugees.

The Asahi Shimbun released an editorial on Dec. 19 quoting North Korean watchers in Japan such as military analyst Ogawa Kazuhisa and journalist Ishimaru Jiro, conveying the message that mass turmoil would not be the most likely scenario in the post-Kim Jong Il period. A day later, another editorial in the Asahi Shimbun sounded a more ominous tone by stating that “there is no guarantee that missiles will not be fired at other countries in the confusion of a power struggle or a display of loyalty to their heir … we have to stay alert.” The article also went on to question the likelihood of the return of Japanese abductees given the power transition. Similarly, a Dec. 20 Mainichi Daily News editorial called for a more proactive role on the part of the US to push the North toward nuclear disarmament, and for Pyongyang to “break free from its obligation to save Kim Jong Il’s face, and reduce a heavy burden on its shoulders as a state by fully releasing information on the abduction issue.” Echoing such sentiments, a Dec. 21 Yomiuri Shimbun editorial framed the deadlocked abduction issue as a “top priority.” Meanwhile, former Japanese Defense Minister Ishiba Shigeru was quoted in the Dec 21 Asahi Shimbun as pinpointing China as possessing the key to preventing any disastrous contingencies on the Korean Peninsula, urging cooperation among Japan, the US, and South Korea to take the lead in alleviating concerns on behalf of China. On a slightly different note, a Dec. 22 Kyodo News article by another well-known North Korean watcher, Leon Sigal, called for a policy of “watchful reassurance” and for Japan to engage the North economically, rather than go “full steam on regime change.” Just how Japan leverages change within North Korea to strike while the iron is hot by maneuvering through the abductee issue without risking greater instability remains to be seen.

Looking forward to 2012

2012 is shaping up to be an eventful year. There will be presidential and parliamentary elections in South Korea, the leadership transition in North Korea will continue, and given its recent track record, the odds are fairly good that Japan will get a new prime minister. Not only will these political changes have repercussions on foreign relations, they also may mark a decisive change. In South Korea, the opposition appears to be gaining in popularity as President Lee Myung-bak’s administration comes to its end. The return of a liberal administration after five years of conservative rule could lead to a new direction in South Korea’s policies toward both North Korea and Japan. As for Japan, Prime Minister Noda began his term on Sept 2, 2011 and it is too early to tell whether and how he might try to shape Japanese relations with the Koreas and the rest of the region. The early months of 2012 should provide a more complete picture of the Noda administration, although it appears that he will follow the policies of his predecessors in focusing on resolving the abduction issue with North Korea and saying all the right things about the Japan-South Korea relationship.

Most attention will be paid to the young leader in North Korea. Little is known about Kim Jong Un, although most observers expect the “Great Successor” to follow the policies of his father while benefitting from a ruling circle of senior elites who will help mentor and guide him as he gains experience in leading the country. Nevertheless, the specifics of how North Korea will pursue relations with China, Japan, South Korea, and the US are unclear, especially given the tentative moves toward some type of bargain with the US that had been discussed in early December. 2012 is also the year that North Korea has declared it will celebrate both its arrival as a powerful nation and the 100^th birthday of its founding leader Kim Il Sung. How Kim Jong Un rules and how he handles his domestic and palace politics will have a major impact on North Korea’s relations with its neighbors.