The first quarter of 2006 produced no real movement in Japan-South Korea relations, nor Japan-North Korea relations. Politics remained chilly while economic and cultural relations were somewhat warmer. Japan-North Korea relations remained stalled over the abductee issue, and Japan-South Korea political relations remain stalled over Yasukuni Shrine. The Japanese and South Korean economies continue to integrate and interact, and cultural relations experienced no real controversies. The next quarter looks to be a continuation of this one. Japan and North Korea have not scheduled another round of bilateral talks, and Roh Moo-hyun and Koizumi Junichiro show no signs of extending the olive branch that will allow them to resume summit meetings. South Korea and Japan will continue discussions about a free-trade area, although such negotiations are likely to make little progress.

Japan-North Korea: “Squeeze, but continue to negotiate”

Japan stepped up pressure on North Korea over the abduction issue and Japan-North Korea bilateral relations made little progress. Even as Prime Minister Koizumi Junichiro continued to oppose economic sanctions against North Korea, steps taken by Japan throughout the first quarter all seem to point in the direction of pressure rather than dialogue. Bilateral talks aimed at normalizing diplomatic ties, the first full-fledged negotiations since October 2002, did take place in early February in Beijing, but produced no concrete agreements. Oddly enough, both Japan and North Korea have urged the other to be “sincere” in dealing with “past crimes” – Japan’s colonial history on the part of North Korea, and the abduction of Japanese citizens on the part of Japan.

The complications added to the Six-Party Talks by the U.S. financial sanctions on the North’s alleged counterfeiting activities not only overshadowed the prospect for the Japan-North Korea bilateral talks, but also gave weight to sanctions advocates within Japan. For Tokyo, supporting the U.S. “squeeze the North, but continue to negotiate” strategy, as described by a senior U.S. official in the March 10 New York Times, means that the opportunity to normalize Japan-North Korea bilateral relations is tied to progress at the Six-Party Talks. At the start of the quarter, Japan’s Senior Vice Foreign Minister Shiozaki Yasuhisa assured senior U.S. officials that Japan would not normalize ties with North Korea unless the abduction, missile, nuclear, and other issues are comprehensively resolved, and that Tokyo will continue to work closely with the U.S. in moving the Six-Party Talks forward. North Korea has called for the removal of the U.S. financial sanctions imposed upon it and complained that the Japan-U.S. joint “anti-DPRK moves” are intended to prepare the way for “a preemptive armed attack on the DPRK.”

A series of decisions made by Japan before the bilateral negotiations on Feb. 4-8 revealed widespread skepticism within the Japanese policymaking elite about the possibility of changes in the North’s behavior, and that Japan had no real interest in making any conciliatory moves toward North Korea, either. The Jan. 10 Japan Times reported that Japan planned to launch two more spy satellites into orbit by March 31, 2007 to improve monitoring capabilities of the North’s nuclear development facilities and its missiles. A week prior to the bilateral talks Japan decided that it would continue its suspension of food aid to North Korea in line with its policy that it will not normalize bilateral ties before the abduction issue is resolved.

On Feb. 2, the Fukuoka High Court nullified the Kumamoto Municipal Government’s preferential tax treatment for a hall associated with the General Association of Korean Residents in Japan (Chongryun). This move is worth noting because the group has enjoyed preferential benefits due to its de facto diplomatic mission status representing North Korean residents in Japan. This ruling marked the first judicial decision to halt a reduction or exemption of local taxes on halls associated with Chongryun for the reasons that “the group’s work does not benefit the general public.” Pyongyang was furious, claiming that Japan has created a hostile atmosphere against Chongryun and Korean residents in Japan where they are “put in fear and panic.”

Japanese moves to pressure North Korea continued. On March 23, Japanese police conducted their first-ever raid of six Chongryun offices that are suspected of being involved in abductions, including the Osaka office of the Chamber of Commerce of North Koreans. The police said that Lee Sam-jun, owner of a Chinese restaurant and the former president of the Osaka Chamber, had conspired in June 1980 with North Korean agents Shin Gwang-su and Kim Gil-wook to kidnap Hara Tadaaki, a then 43-year old restaurant employee. Tokyo plans to place Kim Gil-wook – who now lives in South Korea after serving jail time on espionage charges – on the international wanted list. As a result, diplomatic tension between South Korea and Japan is expected to increase, the Chosun Ilbo said on March 23. Japan and South Korea have an extradition treaty on the books.

The five-day Japan-North Korea bilateral negotiations Feb. 4-8 proceeded with the formula agreed in December last year: three separate panels on 1) the North’s nuclear weapons development program; 2) the abduction of Japanese citizens; and 3) compensation for Japan’s colonial rule. Although both sides met, the negotiations were fruitless. With the abduction issue at the top of the agenda of all three tracks, Japan was unyielding in insisting that Pyongyang 1) return any remaining abductees in North Korea; 2) provide concrete evidence on the fate of those Pyongyang says died in North Korea; and 3) hand over the North Korean agents who abducted Japanese citizens in the ‘70s and ‘80s. Faced with a hardline Japanese attitude toward the abduction and nuclear weapons issues, Pyongyang tried unsuccessfully to divert attention to the compensation for Japan’s colonial past. North Korea declined Japan’s proposal that Japan give a lump-sum relief payment in the form of economic aid instead of “compensation” for Japanese colonial rule. Overall, because Tokyo ruled out a possibility of any compromise in the abduction issue due in part to domestic pressure, it was simply hopeful that the North would change its mind and give in during the negotiations. Pyongyang’s chief negotiator Song Il-ho said after the negotiations that “dialogue and pressure cannot coexist with one another.”

Following the deadlocked bilateral talks, the U.S. military and Japan’s Self Defense Forces engaged in exercise Keen Edge, held Feb. 23-March 3, which included simulations of North Korean missile launch detection and the evacuation of Japanese citizens from South Korea, among other scenarios.

By the quarter’s close, Japan’s ruling Liberal Democratic Party (LDP)-led coalition approved a bill on March 17 that would require the Japanese government to impose sanctions on North Korea if it failed to make progress in resolving the abduction issue. The Chosun Ilbo reported March 13 that Tokyo was looking at ways to enforce existing laws to strangle cash flows to North Korea. By interpreting foreign currency and trade laws more strictly, Tokyo decided to carry out unannounced inspections of an estimated 1,000 Japanese export companies that deal with hardware that could increase North Korea’s military capabilities. The government also plans to check the remittances posted to North Korea, in some cases actually asking to open and inspect mail. Watanabe Shu, a House of Representatives member of the Democratic Party of Japan, drew attention when he reported that the number of remittances to the North was on the rise: 1,560 in fiscal year 2004, compared to 383 in fiscal 2002 and 506 in 2003.

Japan-South Korea relations

Japan-South Korea bilateral relations deteriorated badly in 2005 and the chill continued into the first quarter of 2006. Both Prime Minister Koizumi and President Roh Moo-hyun refused to budge when it came to matters related to Yasukuni Shrine, and each complained that the other lacked understanding of the efforts that he had made to improve the situation. Importantly, however, despite the nationalistic public sentiments around the 87^th anniversary of the March 1 Independence Movement and Takeshima Day on Feb. 22, the two countries signed a bilateral pact that promotes judicial cooperation on criminal investigations. Meanwhile, the diplomatic deadlock over history issues has become more intertwined with domestic politics. Groups within each country voicing different approaches to the problem challenged the current leadership in both countries.

At a New Year’s news conference Prime Minister Koizumi on Jan. 4 reiterated his views that his shrine visits are “a matter of [the] heart,” and that, therefore, China and South Korea should not close the door to summit talks based only on that single issue. South Korea responded by urging the Japanese leadership to “try to win trust and respect from related countries from a correct stance on the perception of history.” Later that month, Japan’s Foreign Minister Aso Taro said that he believed that the emperor should visit Yasukuni Shrine, but backpedaled on his remarks after strong protests were lodged by Seoul.

On the 87^th anniversary of the March 1 Independence Movement, President Roh advised Prime Minister Koizumi that an act of a nation’s leader should be judged by the standard of whether such an act is proper in light of universal conscience and historical experience. His remarks on Japan’s moves with regard to a revision of the pacifist Constitution that an “ordinary country” does not have to entail a military buildup were followed by Koizumi’s advice to Roh that he should take a close look at Japan’s behavior in the 60-year postwar period and its efforts to create a friendly relationship. Shortly after the March 1 Independence Movement Day, on March 6, a sub-Cabinet-level strategic dialogue between Japan’s Vice Foreign Minister Yachi Shotaro and South Korea’s Vice Foreign Affairs and Trade Minister Yu Myung-hwan took place but there was no indication that it would serve as a turning point in bilateral relations.

Behind the chilly diplomatic scene lies domestic political dynamics in Japan and South Korea. Prime Minister Koizumi has been caught up with a series of scandals: the fabrication of earthquake-resistance design data for hotels, the alleged violation by Livedoor of the Securities and Exchange Law, bid-rigging cases involving the Defense Facilities Administration Agency, and the discovery of prohibited parts in a U.S. beef shipment. In addition, Koizumi was being criticized for not having explained how he would repair relations with China and South Korea.

While the “scandal Diet” was under way, Asahi Shimbun March 17 reported that recent moves within the LDP could make Japan’s worsening relations with China and South Korea a key issue in the September election for the LDP presidency. According to Asahi, members of three LDP factions jointly founded a study group to promote Japan’s policies toward Asia. Given the September election, this may provide a chance to improve Japan’s ties with its Asian neighbors. At the same time, former Chief Cabinet Secretary Fukuda Yasuo, a potential candidate to succeed Koizumi who is also known as a dove, drew attention when he was welcomed by President Roh.

In South Korea, Grand National Party Chairwoman Park Geun-hye criticized President Roh, saying that Roh’s “emotional responses cut off talks.” On March 8, she paid a visit to Koizumi in Tokyo, and reportedly used the prime minister’s motto – the Confucian tenet that “nothing can be done without trust” – to draw lessons for relations between Japan and South Korea. Chosun Ilbo quoted GNP officials on March 8 saying that Koizumi showed his appreciation for her remarks and emphasized the importance of friendship between the two countries.

The public rallied around the flag on the occasions of the March 1 Independence Movement (South Korea) and Takeshima Day (Japan). For example, in celebrating Takeshima Day Feb. 22, Shimane Prefecture decided to distribute copies of the quarterly Photo Shimane to some 260,000 households in the prefecture, in which the magazine claims that the Dokdo/Takeshima islets are indisputably Japanese territory. In South Korea, the Korea Times reported Feb. 21 that hundreds of South Koreans rallied in front of the Japanese Embassy in downtown Seoul, urging Shimane Prefecture to scrap its Takeshima Day statute and cancel the anniversary celebrations. In the meantime, the Japanese government requested an explanation of the “motive behind” the flight of Korean Air Force Chief of Staff Gen. Kim Sung-il over the Dokdo/Takeshima islets. Gen. Kim led a squad of two F-15 Ks and two F-16s and circled above the islets for several minutes as a “symbolic gesture to inform Korea and the world that the Dokdo islets belong to Korea.”

The quarter closed with no positive changes; a spokesman for South Korea’s Chong Wa Dae (Presidential Blue House) said March 17 that President Roh would not hold a summit with Prime Minister Koizumi unless he promises to stop visiting Yasukuni Shrine, adding that “there is no Korean leader that would make a concession on the Yasukuni problem, which runs contrary to the history.” Though President Roh did mention in his March meeting with former Chief Cabinet Secretary Fukuda and former Prime Minister Nakasone Yasuhiro that he “wanted to [visit the Yushukan as a symbolic gesture against the temple] but was stopped” by his aides. Upon making that comment, he again blasted Koizumi for visiting the shrine.

Economics

Yet, even while politics is chilly, economic and cultural relations continue to be warm. The exception to this is Japan-North Korea relations. The strained bilateral relations between Japan and North Korea were very much in evidence as their bilateral trade reached a 28-year low in 2005. According to the Korea Trade-Investment Promotion Agency (KOTRA), Japan-North Korean trade volume was $190 million in 2005, the lowest since 1977, with the North’s exports to Japan marking $130 million and its imports from Japan $60 million. Joongang Ilbo Feb. 13 reported Japan’s boycott of North Korean products and the North’s expansion of its trade with China as contributing factors. Recent developments in financial sectors along with the U.S. financial sanctions against North Korea are expected to worsen economic cooperation among Japan, South Korea, and North Korea; after the U.S. Treasury banned all transactions between U.S. financial institutions and Banco Delta Asia, the Macau-based bank, Japan’s largest banks have voluntarily ceased all transactions with the bank. Similarly, South Korean banks started to follow the U.S. lead in severing ties with Banco Delta, which started when South Korea’s National Federation of Fisheries Cooperation and Korea Exchange Bank terminated all transactions with the bank in early February.

Japan and South Korea are pulled by interdependence/integration and pushed by deepened competition. Some assert that a lack of political will is the cause for the lack of progress in Japan-South Korea FTA negotiations. On March 9, Japanese business leaders, bureaucrats, lawmakers, and scholars and South Korean journalists met at a symposium in Tokyo and agreed on a need to revive talks on a bilateral free trade agreement. Japan and South Korea launched the talks in December 2003, but they have been stalled since November 2004 due to differences in respective agricultural and fisheries policies. Positive signs occurred when South Korea’s Deputy Prime Minister and Minister of Finance and Economy Han Duck-soo said that Seoul would seek to resume FTA talks with Japan soon. In Japan, a key annual gathering of senior business leaders in Kansai called to improve relations with China and South Korea to create an East Asian economic bloc.

On the monetary front, Asian Development Bank President Kuroda Haruhiko announced that the Bank planned to introduce a notional unit of exchange called the Asian Currency Unit (ACU) as a yardstick to monitor moves in currency values. According to Kuroda, the ACU will facilitate development of an Asian multicurrency bond market and deepen capital markets, which will reduce exposure to external shocks. Meanwhile, Japan and South Korea reached an agreement Feb. 4 to increase the size of a bilateral currency swap agreement from $7 billion to $15 billion.

South Korea’s trade deficit with Japan is on the rise, reaching $23.7 billion in 2005, making the cumulative deficit more than $250 billion. During this quarter, the big news in Japan-South Korea trade relations involved seaweed, computer memory chips, and the World Trade Organization (WTO). After Seoul filed a complaint against Japanese import quotas with the WTO, Tokyo agreed with Seoul to gradually expand import quotas for seaweed starting in April to 1.2 billion sheets by fiscal year 2015. On March 14, South Korea said it referred the Hynix Semiconductor dynamic random access memory microchip case to the WTO. In January, Japan levied a 27.2 percent punitive duty on Hynix chips to counter alleged subsidization by the ROK government on exports of Hynix products. Hynix received a total of 1.04 trillion won in subsidies in March 2004 alone, alleged Japan’s Finance Ministry. South Korea’s Foreign Affairs and Trade Ministry has criticized Japan’s action, saying the loan to Hynix was not a subsidy.

More positively, Toshiba Corp. and LG Electrics Inc. have signed a cross-licensing agreement that will enable them to share patented optical disc technologies; the pact’s coverage ranges from discs and disc drives to disc player-recorder technologies on which the companies have international patents. Korean Air and Japan Airlines concluded a code-sharing partnership on all routes between the two countries; the airliners will share all 185 flights a week by Korean Air and all 70 JAL flights. 

On Feb. 18, Chosun Ilbo reported that Korean Railroad Corporation and JR Freight Railway are expected to start transport service for container freight. Using railway and shipping, goods from Seoul are expected to arrive in Tokyo within 48 hours. Seoul and Tokyo are under negotiation to begin the operation this July after signing a memorandum of understanding in April.

Culture

An interesting survey by the Japan Youth Research Institute showed that 49 percent of Chinese students and 40 percent of South Korean students who have visited Japan said they like Japan, while overall, only 25 percent of high school students in China and 24 percent in South Korea like Japan.

South Korea’s GNP Chairwoman Park Geun-hye suggested a joint history textbook during her visit to Tokyo. This came as the South Korean government decided to award $20,000 in compensation to the families of Koreans who died in forced labor under Japanese colonial rule. Meanwhile, South Korean prosecutors have started taking land from collaborators during Japanese rule. In response, the descendants of branded collaborators have filed 26 lawsuits against the government; under a new bill passed last year, the South Korean Justice Ministry has for the first time terminated proceedings in four lawsuits, which means that the government has legal jurisdiction to take back land inherited from pro-Japanese descendants. In Japan, Tokyo decided to pay compensation of ¥8 million to 431 Korean and Taiwanese who were forcibly segregated in camps during the Japanese colonial period.

On a positive note, starting in March 2006, South Koreans will enjoy a 90-day visa waiver when they visit Japan. A South Korean Foreign Ministry spokesman welcomed the move and expressed the desire that the decision “will serve as an opportunity to facilitate human and cultural exchanges between the two countries and improve mutual understanding and friendship.”

Tying up loose ends, on March 1, South Korea returned the 18^th century war monument, Bukgwandaecheopbi, to North Korea. The monument was returned by Japan last year. After a brief ceremony and exhibition, Seoul sent it north, where the monument was originally situated to commemorate the 1592 victory over the Japanese invaders.

Finally, South Korea’s TV star “Yonsama” Bae Yong-joon and Japan’s maverick dot.com pioneer, Masayoshi Son of Softbank decided to join hands to spread Korean pop-culture in Asia. Bae and Softbank Korea announced Feb. 20 that they will make a joint investment of $13 million to take over the KOSDAQ-listed Autowin Tech.

Looking ahead

The next quarter looks to be a continuation of this one. There has been no plan to reconvene the Six-Party Talks, Japan and North Korea have not scheduled another round of bilateral talks, and Roh Moo-hyun and Koizumi Junichiro show no signs of extending the olive branch that will allow them to resume summit meetings.

In economic matters, South Korea and Japan will continue discussions about a free-trade area, although such negotiations are likely to make little progress, given that the issue of agricultural subsidies and protection – the main issue in the free-trade talks – is an important domestic political item for both countries.