“Japan-Korea Friendship Year” limped to a close, with petty unresolved problems between Japan and South Korea continuing to overshadow the relative stability of the actual relationship. The media in both countries had a field day with the various spats, almost gleefully highlighting disputes over territory, textbooks, and history. Japan-Korea relations have worsened, not improved, in the past year.

It is important to keep these diplomatic disputes in context: very few of these disputes had actual consequences for policies on either side. Although South Korean President Roh Moo-hyun’s frigidly polite interaction with Japanese Prime Minister Koizumi Junichiro at the East Asia Summit was noted throughout East Asia, most policies between the two countries remained unchanged. South Korean-Japanese economic interaction proceeds apace, and the long-discussed free trade agreement (FTA) between the two countries is victim, not of sentiment over history, but of much more mundane domestic politics and an unwillingness by either side to give ground on agricultural issues. Policy toward North Korea is stalled, but that is because the Six-Party Talks themselves have not made progress. Thus, although relations are hardly warm, these disputes remain the province of rhetoric and showmanship. It is too early to tell whether 2006 will see renewed leadership between the two leaders or a slide further into diplomatic squabbling.

Japan-North Korea relations: abductions as human rights

Against the backdrop of the stalled Six-Party Talks, Japan-North Korea negotiations aimed at normalizing ties have made positive – albeit very slow – progress. By quarter’s end, Japan and North Korea agreed to resume normalization talks as early as late January and to set up working groups to separately deal with the “three-track talks”: 1) the abduction issue, 2) the national security issues, and 3) the normalization of bilateral diplomatic ties, including the settlement of Japan’s past colonial rule. While potential financial incentives have kept North Korea at the negotiating table with Japan, the U.S. has stepped up economic sanctions on Pyongyang, including banning U.S. banks from conducting business with a Macau bank suspected of involvement in North Korea’s money laundering. Using the normalization card as carrot, Japan has been pushing for the package of working groups to further discuss the issue.

A conciliatory mood from the Sept. 19 Joint Statement was carried over onto Japan-North Korea relations at the start of the quarter. On Oct. 13, Pyongyang signaled flexibility on the abduction issue that has caused a deadlock in the normalization talks since last year by saying that it was willing to listen to what Japan had to say about the remains of abductee Yokota Megumi. Song Il-ho, vice director of the North Korean Foreign Ministry’s Asian Affairs Department, hinted at an invitation for Prime Minister Koizumi to visit North Korea when he said, according to The Japan Times, “we would agree to anyone who would want to visit to improve bilateral relations, of course including Japanese Prime Minister Koizumi.” Tokyo did not change its policy, but it did soften its stance on economic sanctions against North Korea. On Nov. 3, Abe Shinzo, newly appointed chief Cabinet secretary – who has been vocal in calling for economic sanctions – emphasized the importance of dialogue in tackling the abduction issue.

However, the two sides are at an impasse. Throughout bilateral negotiations held in early November and late December, Japan seemed to apply its “dialogue and pressure” approach toward North Korea; while it toned down the possibility of economic sanctions against the North, it has been firm from the outset in insisting that North Korea not be offered aid or normal diplomatic relations unless the abduction issue is resolved. On the part of North Korea, it has maintained its official position that the abduction issue has been settled, and tried to focus on historical issues. North Korea’s acceptance of Japan’s proposal for the package of three working groups is largely understood as an attempt to receive economic aid from Japan in the form of compensation for Japan’s 35-year colonial rule of the Korean Peninsula, and to seek Japan’s help amid the worsening U.S.-DPRK relationship.

Two days of bilateral negotiations on Nov. 3-4, the first full-fledged negotiation since November 2004, yielded no concrete agreement. With the abduction issue at the top of its agenda, Japan is said to have demanded that Pyongyang 1) return abductees to Japan, 2) conduct investigations to uncover the truth about the abductees, and 3) hand over North Korean agent suspects, according to the Asahi Shimbun Nov. 4. Tokyo pressed for further information on the eight abductees who have not returned to Japan (of the 15 North Korea admitted abducting,) and another three who Tokyo believes were kidnapped by Pyongyang. No solid progress was made, as Japanese Foreign Minister Aso Taro said, “they [Pyongyang] have insisted that the issue was resolved… I have not heard that they made a positive proposal on the abduction issue.” On the other hand, Pyongyang’s eyes were on reparations for Japan’s colonial rule, which the Korea Times reported, could infuse as much as $10 billion into the North Korean economy. Japan paid South Korea $500 million at the time of Japan-South Korea normalization in 1965 and Tokyo promised full-scale financial aid to Pyongyang upon diplomatic normalization.

The December negotiations did succeed in producing a foothold on which both sides could seek to “take specific measures to resolve issues of mutual concern.” North Korea suggested having experts from the two countries hold talks over the cremated remains which North Korea gave Japan in November 2004, and Japan agreed. However, Japan seemed cautious about the prospect for success; Japan’s Chief Cabinet Secretary Abe emphasized “specific” means the return of any abduction victims who are living in North Korea, while Pyongyang kept arguing the abduction issue is resolved. Prime Minister Koizumi reiterated Japan’s policy that normalization talks would not make much progress unless the abduction issue is dealt with during the December negotiations.

Aside from Japan-North Korea negotiations, another noticeable event was that the abduction issue has been included in the larger issue of North Korea’s human rights. Both the Japanese government and civic groups have managed to push the issue onto the international stage with some success. On Dec. 6, Tokyo appointed its ambassador to Norway as special envoy to oversee human rights problems, including North Korea’s abductions. According to The Japan Times Dec. 7, the post is aimed at drawing international attention to help resolve the abduction issue in the wake of U.S. President Bush’s appointment of Jay Lefkowitz as his special enjoy on human rights in August.

On the nongovernmental front, people from Thailand, Lebanon, South Korea, and Japan whose families or relatives were allegedly abducted to North Korea joined a rally in Tokyo to raise public awareness. A citizens’ group on behalf of relatives of the Japanese abductees said that Pyongyang is believed to have abducted people from countries as diverse as Romania, China, Malaysia, Singapore, France, Italy, the Netherlands, and Jordan, based on the account of former U.S. Army Sgt. Charles Jenkins, a husband of repatriated abductee Soga Hitomi. Foreign Minister Aso indicated that Japan and Thailand could cooperate on the matter of a recent revelation that the North could have abducted a Thai woman.

On Dec. 16, at the United Nations General Assembly, member countries adopted a resolution criticizing North Korea’s human rights violations, including the abductions of foreigners. The resolution was put forward by the European Union and cosponsored by the U.S., Japan, and other countries. China and Russia voted against the resolution and South Korea abstained from voting. Pyongyang criticized Japan along with the EU and the U.S. for exploiting human rights problems for political gains and later raised the issue during the December negotiations.

Although it is yet to be seen how Japan-North Korea bilateral negotiations and the Six-Party Talks would affect one another, there has been no clear indication that Japan-North Korea bilateral moves had any positive impact on the Six-Party Talks. Upon Pyongyang’s announcement that it planned to start developing light-water reactors for nuclear energy in late December, Japanese Foreign Ministry spokesman Taniguchi Tomohiko said “it is going to be suicidal for North Korea to pursue the course. This is going to undermine the whole rationale of Six-Party Talks.”

Japan-South Korea relations: Yasukuni, again…

Prime Minister Koizumi’s visit to Yasukuni Shrine Oct. 17 dominated the closing three months of “Japan-Korea Friendship Year.” The quarter presented many opportunities for Japan-South Korea diplomacy at the highest level, but to no avail; the Roh-Koizumi summit scheduled in December as part of regular “shuttle diplomacy” did not occur; the 20-minute meeting between Roh and Koizumi on the sidelines of APEC only reminded them of the cold relations between the two countries, and Roh and his Chinese counterpart refused to meet with Koizumi at the East Asia Summit, criticizing Japan’s “insincere” attitude toward its past wrongdoings.

Three observations deserve attention in the Japan-South Korea interaction. First, when it comes to the Yasukuni Shrine issue, there appears to be a repeated cycle of chain reactions: Japan’s behavior upsets South Korea and leads Seoul to criticize Tokyo; in response, Japan makes a few conciliatory moves emphasizing the importance of bilateral ties, but Seoul responds in a cold manner, arguing that Tokyo’s deeds should live up to its words; then the cycle repeats itself with another set of Japanese “provocations.” Second, Koizumi’s decision regarding the Cabinet reshuffle in the wake of his reelection meant that the liberal South Korean government now had to deal with more hawks within the Japanese government, widening the gap in perspectives over various bilateral issues, including history and the North Korean nuclear crisis. Third, Tokyo has experienced more diplomatic isolation this quarter due to its behavior and comments over historical issues, in particular the Yasukuni Shrine issue, which had the unintended outcome of bringing South Korea and China closer, while Japan-U.S. ties became warmer.

This year Prime Minister Koizumi chose Oct. 17 to pay his fifth visit to the Yasukuni Shrine, and Seoul’s reaction was outrage, as expected. South Korean Foreign Minister Ban Ki-moon summoned Japan’s Ambassador to Korea Oshima Shotaro to lodge a complaint, saying that “it is not an exaggeration to call the Shrine visits the most critical factor in strained South Korea-Japan relations.” The immediate reaction from South Korea’s Blue House was to consider canceling President Roh’s visit to Japan in December as well as the one-on-one meeting with Prime Minister Koizumi at the APEC summit. The next day Foreign Minister Machimura Nobutaka told the press that he hoped President Roh’s scheduled visit to Japan would not be canceled, saying “exchanges between the two governments should not be stopped because of one issue” while Japanese government spokesman, Hosoda Hiroyuki tried to explain that Koizumi’s visit to the shrine was done in his personal capacity, not as prime minister.

The issue of Yasukuni is divisive within Japan itself. The Osaka High Court ruled Sept. 30 that Prime Minister Koizumi’s visits to the Yasukuni Shrine from 2001 to 2003 were done in his official capacity and therefore forbidden by the nation’s Constitution. The decision came a day after the Tokyo High Court gave the opposite ruling on the matter. An opinion poll by Mainichi Shimbun shortly after Koizumi’s Oct. 17 visit to Yasukuni showed that support for the visit was four points higher than those who opposed it, this in contrast to four previous Mainichi polls held before Oct. 17 which all had public opinion solidly against the visit. Among Japanese politicians, the leader of New Komeito, the ruling coalition partner of the Liberal Democratic Party (LDP), called on the foreign minister, chief Cabinet secretary, and prime minister to refrain from visiting Yasukuni; Former Prime Minister NakasoneYasuhiro (1982-1987 – the third longest postwar term) urged Koizumi not to visit the Shrine and to refrain from “pandering” to populism. He urged Koizumi to have far-sighted policies. Cabinet members are said to hold different views on Koizumi’s Oct. 17 visit while many refrained from making a judgment, reported The Japan Times.

On Oct. 31, Koizumi named Aso Taro as foreign minister and Abe Shinzo as chief Cabinet secretary. Aso is believed by South Koreans to have claimed that Koreans asked to be given Japanese names during the colonial era; Abe has been a leading figure in opposing normalized ties with North Korea. Because both are known as strong supporters of Koizumi’s Shrine visits and have backed conservative moves to impose sanctions against North Korea over the abduction issue, South Korea read such appointments as Koizumi having “no further interest in ties with Korea and China.” South Korea’s Vice Foreign Minister Song Min-Soon also expressed concern that such appointments could affect the Six-Party Talks in a negative way.

Japanese Foreign Minister Aso and his South Korean counterpart Ban agreed to mend bilateral relations during their talks over the phone Nov. 2, but soon found that it was easier said than done. During their meeting on the sidelines of the APEC forum on Nov. 14, Ban told Aso that Tokyo should act in a way that reflected “sincere reflections” on its colonial legacy in order to instill trust of Japan in the minds of Korean people. Aso said what Koizumi has stated was his position and had nothing to add. When Aso urged Ban to confirm a visit by President Roh to Japan next month, Ban gave no reply.

Despite the lack of solid progress in mending bilateral ties, their meeting was not without fruit. They reached agreement 1) on the importance of implementing the September statement on dismantling North Korea’s nuclear programs; 2) to jointly draft a five-year program to promote cultural exchange, including exchanges among teachers and youths; and 3) to hold the first meeting of a second round of a joint historical study by the year’s end.

On the opening day of the APEC summit in Busan, South Korea, President Roh and Prime Minister Koizumi also held a brief meeting for 20 minutes, which was said to be barely long enough to exchange formal greetings with interpreters. After they exchanged opinions about Japan’s perception of history and possible followup measures for the Six-Party Talks, by the end of the meeting it became clear that a visit by Roh to Tokyo was “out of the question.” Foreign Minister Aso also expressed the view by saying “if he [President Roh] visits, it would mean that Japan must make some kind of a concession, and I am not sure whether it would be right to make it on Yasukuni.”

Not only did South Korean President Roh cancel his summit with Koizumi that had been scheduled for December, but Chinese President Hu Jintao refused to hold a one-on-one meeting with Koizumi at the APEC summit. The annual summit between China, South Korea, and Japan during the ASEAN Plus Three/East Asia Summit was cancelled as China referred to “the current atmosphere,” implicitly referring to Koizumi’s repeated visits to the Yasukuni Shrine. Despite the fact the Southeast Asian countries benefit from trade relations with Japan, Japan’s image at this year’s ASEAN meeting has been “tarnished” by repeated criticism of Koizumi’s visit to the Yasukuni Shrine. Apparently, Koizumi was puzzled by the strong reaction both from South Korea and China. However, the summit cancellation and criticism from South Korea and China did not change his position; Koizumi defended his visits as “a spiritual question” and said, “I don’t understand why anyone should be criticized for offering prayers.”

While Koizumi was trying to downplay the tension as “temporary” and said it would not undermine the regional influence of Japan, the Yasukuni issue provided common ground for South Korea’s Roh and Chinese Prime Minister Wen Jiabao during their bilateral meeting. They were brought closer as they strongly criticized the prime minister’s visits to Yasukuni; the two leaders shared the view that they cannot accept the Yasukuni visits and that Japan should offer its youth a correct history education.

After the East Asia Summit, Japan’s foreign minister made a conciliatory statement. In a statement at the 40^th anniversary of the establishment of diplomatic relations, Aso said that Japan would seriously take heed of the sentiments of the South Korean people, but Foreign Minister Ban responded noting “their [Japan’s] actions need to be in line with their words.”

Thus, Japan-South Korea relations ended with a lot of rhetoric about who had the right to do what. Summits were cancelled, and little progress was made. However, as noted, the major policy issues confronting Japan and South Korea were not affected – the time to worry will come if sentiment gets in the way of policy, and that has not yet happened. Most of the rhetoric on both sides was aimed at pleasing domestic constituencies. In Koizumi’s case, he is walking a fine line between an increasingly influential – albeit still small – group of hardline nationalists, and the majority of Japanese who hold more moderate views. For Roh Moo-hyun, a spat with Japan is always an easy win, and a way to mask increasing criticism over his domestic economic policy and his policy toward North Korea.

South Korea-Japan economic relations

The quarter witnessed no major development in Japan-South Korea economic ties, but small steps of continued and deepening interdependence. First, there was no official progress in resuming negotiations to conclude an FTA between Japan and South Korea, in large part because of domestic opposition from agricultural interests in both countries. In the meantime, South Korea-ASEAN FTA talks made substantial progress, with last-minute negotiations at the APEC summit aimed at finalizing the deal. As a result, South Korea will acquire important leverage in negotiating FTAs with other countries as it could utilize the South Korea-ASEAN FTA as the core of its trade strategy.

Second, Japan and South Korea found themselves in a similar negotiating position during the Doha Round of WTO talks over agricultural trade in Hong Kong. Both South Korea and Japan have been under strong pressure from inside and outside the country. Domestic agricultural interests in both countries linked the cultural tradition of viewing rice as “the life of our nation” as a justification for continued support and defense of agriculture; criticism of Japan and South Korea from rice producing countries over their protective approach increased during the Hong Kong talks, where agriculture is the main unresolved issue.

In November, South Korea’s National Assembly passed legislation allowing increased imports of rice after negotiating with the U.S., China, Thailand, and six other rice producers. The South Korean government – while increasing subsidies to rice farmers – must double its current 4 percent limit on rice imports by 2014 and eventually open the rice market fully. As for Japan, since 2000, Japan has allowed imports of 767,000 tons a year, about 8.8 percent of the overall consumption of 8.7 million tons. Japan places a 778 percent tariff (!) on rice imports in excess of the 770 tons of rice it imports under a low- tariff quota. The quota is equivalent to about 7.2 percent of domestic consumption. The U.S. has proposed setting a mandatory tariff limit for industrialized countries of 75 percent for agricultural products and Japan is strongly opposed to such a ceiling.

South Korea’s largest carmaker Hyundai Motors is on the move to increase advertising in Japan in an effort to increase market share there. Hyundai Motors has less than 1 percent of the Japanese market while it has a 2.9 percent share in the U.S. The company said it predicts sales in the Japanese market will rise soon, as its Grandeur sedans have been ranked 10^th among 36 brands in the 2005 initial-quality study by J.D. Power & Associates, just ahead of Honda Motors.

Samsung Techwin, Samsung Group’s digital camera unit, has signed an agreement with Japan’s leading camera maker Pentax to jointly develop digital single lens reflex, or D- SLR cameras. According to a Samsung spokesman, Pentax’s advanced optics technologies and Samsung’s brand power, marketing capabilities, and manufacturing skills can lead to a bigger share of the local and foreign camera markets. In the global market, sales of digital cameras should rise to 89 million next year, an increase of about 7 million from this year.

The most notable foreign investment between the two countries was Japan’s telecommunication company NTT DoCoMo Inc., which in December began negotiations to buy 10 percent of South Korea’s telecommunications company KTF Co. for around $500 million. DoCoMo had previously tried to purchase shares in SK Telecom, but the deal fell through in 2001. KT Corp., which owns a 49 percent stake in KTF and is South Korea’s biggest telecommunications company, is also moving to increase its investments and alliances with other service providers. The company says 1 trillion won will be set aside for budding business such as WiBro, IP-TV, and digital content.

South Korea’s flat panel maker Samsung SDI Co. decided to file a lawsuit in U.S. federal courts against Japan’s Matsushita Electric Industrial Co. for alleged violation of its plasma display panel patents. Samsung SDI claimed that Matsushita infringed upon nine of its PDP technology patents. The lawsuit came after a year of consultations between the two companies failed to find a resolution.

Finally, for the first time since August 1998, the yen fell below 880 won. The weak yen raised concerns that Korean exporters that compete with Japanese firms could lose their edge.

Hallyu continues, but a backlash arises

The chill of Japan-South Korea diplomacy and the heated confrontation over historical issues did not reverse the flow of the “Korean Wave,” although it seemed to encourage the emergence of an “Anti-Korean Wave” in Japan. The number of Japanese who look favorably on Korea rose by 10 points to nearly 80 percent. And Japan’s NHK public broadcasting company started to air a Korean drama, titled “the Promise of Jang Geum” on terrestrial channels at 11:00 PM. every Saturday, the same time “Winter Sonata” used to air. While Korean pop culture helped the Japanese public feel closer to the South Korean people, upgrading South Korea’s image in Japan on the whole, there was a setback as a result of historical issues.

The backlash to the Hallyu (Korean Wave) is best exemplified by Sharin Yamamo’s comic that reinterprets Japan’s colonial rule over Korea. The Mainichi Shimbun reported that “Hate Korea: A Comic,” whose interpretation of history shows “savage Korean immigrants massacring innocent Tokyo residents in the wake of World War II,” has gone through five printings and has sold more than 320,000 copies since its release in September. Another comic, fashioned after Kobayashi Yoshinori’s “Manifesto of New Pride” series of comics, claims that Japan waged a noble war to liberate Asia from a racist world order.

In their report released on Oct. 28, Amnesty International urged the Japanese government to compensate Korean women forced to serve as sex slaves for the Japanese military during World War II. The report says the Asian Women’s Fund set up to assist former sex slaves in South Korea, the Philippines, Taiwan, and the Netherlands in 1995 fails to meet international standards for compensation and “has been malignantly used by Japan to cunningly avoid its international and legal responsibility.” Most women have refused to accept the money, demanding an explicit apology by Japan and larger sums in direct compensation from the Japanese government.

In a related issue, the Japanese government decided to compensate South Korean and Taiwanese Hansen’s disease patients who were mistreated during Japan’s colonial rule. Japan’s Ministry of Health, Labor, and Welfare said that about 400 people will benefit based on its domestic compensation law for Japanese victims of the past Japanese government’s policy of segregating Hansen disease patients from society.

The Bukgwandaecheopbi, a monument stolen by the Japanese Imperial Army during the Russo-Japanese War was returned to Korea on Oct. 20. The monument was set up in 1709 in what is North Korea’s Hamgyeong Province by the provincial governor to commemorate the 1592 victory of Gen. Chung Mun-Bu over Japanese invaders. The monument will stay in the National Palace Museum of Korea in Gyeongbok Palace for restoration for about six months to a year and then be sent on to North Korea, reported Chosun Ilbo Oct. 20.

Finally, Japan’s Minister of Land, Infrastructure, and Transportation Kitagawa Kazuo confirmed that starting from early next year Japan will make a visa waiver for short-term South Korean visitors permanent. Koreans and Taiwanese are the two biggest groups of tourists in Japan.

Next quarter forecast calls for continuing chill

The upcoming quarter portends little at this point. Japan and North Korea will meet over the abductee issue, but barring an unforeseen event, there is little prospect that any breakthrough will occur. Koizumi and Roh Moo-hyun have no plans to meet, and the Six-Party Talks are subject to a number of eventualities that may make a meeting unlikely. Even if the talks convene, it is unlikely any progress will be made.