Japan to resume talks between export control officials of Seoul and Tokyo

Japan has approved the supply of high-tech material to South Korea for the first time since the imposition of export restrictions last month, but has redoubled political pressure and warned it could expand restrictions on supplies to its Asian neighbor..

The Japanese government on Thursday said it would allow the export of some high-tech materials deemed vital to South Korea’s semiconductor industry. Companies like Samsung use them to make computer chips..

In July, Tokyo tightened restrictions on the export of three chemical materials to South Korea, citing national security concerns. The South Korean government, which previously called Tokyo’s trade restrictions reckless, confirmed Thursday that Japanese companies have received the green light to ship one of the chemicals..

The first approvals were granted after Japanese officials conducted rigorous checks and confirmed that there were no national security concerns. This was announced by the chief secretary of the Japanese government, Yoshihide Suga..

«Usually we don’t declare every time we give export permission. However, the South Korean government has called our actions an export embargo, which is unfair criticism.», – Minister of Industry of Japan Hiroshige Seko said at a briefing.

He also added that Tokyo will expand restrictions on the export of specialized chemicals if there are any cases. «wrong» use. Some of the chemicals used to make smartphone displays and chips can also be used in weapons..

The controversy, rooted in wartime past and exacerbated by the recent tightening of restrictions on the supply of three high-tech components, has rekindled nationalism and raised concerns about trade. Relations between the two US allies deteriorated late last year as a result of a decades-long dispute over compensation for forced labor during the Japanese occupation. South Korea recalls its difficult history with Japan, which colonized the Korean Peninsula during World War II.

South Korean President Moon Jae-in said on Thursday that tougher restrictions would undermine Japan’s international credibility and accused Tokyo of using its industrial advantage as a weapon against another country..

«Even if there are some benefits, it will not last long. After all, this is a no-win game where everyone, including Japan itself, becomes a victim.», – said Moon.

Japan struck South Korea out of «whitelist» countries with expedited trade status, which means that some exporters may have to go through a lengthy application process for permission to ship restricted items to South Korea.

This covers a wide range of items, including those related to the production of weapons and machine tools..

South Korea, which was supposed to announce its intention to exclude Japan from its «whitelist» on Thursday, however, postponed the decision pending further discussion.

South Korea buys approximately $ 54 billion worth of Japanese goods, including industrial machinery, chemicals and automobiles, according to a tracking tool linked to the Massachusetts Institute of Technology..

Restrictions on chemical materials are already worrying the global semiconductor industry. South Korean Samsung and SK Hynix produce nearly two-thirds of the world’s memory chips, which are used in everything from smartphones to self-driving cars. Smartphone makers including Apple and Huawei use memory chips from South Korean companies.

Samsung’s head of investor relations, Robert Yee, said in a call last week that the company "faced difficulties" due to Tokyo export controls "and the uncertainty that this new process will bring".

A spokeswoman for SK Hynix said last week that "certain difficulties are expected in ensuring the safety of materials" now that South Korea has been whitelisted. She added that the company is working to build stocks and diversify suppliers..

Japan resumes exports to South Korea, but with a warning

Korea said it plans to tighten rules on imported coal ash, mainly from Japan, used to make cement, and has offered tax incentives to local firms should they need to buy foreign chemical products as Seoul tries to reduce its dependence on Japan..

The meeting of the National Security Council of South Korea was held on Thursday, its members agreed to review measures to combat «reciprocal» actions of Japan, but do not abandon attempts to resolve the issue through dialogue, the presidential office said.

Restrictions have also raised concerns in corporate Japan..

«This situation is not beneficial to either Japan or South Korea, ”Nikon Senior Executive Vice President Masashi Oka said at a recent briefing. – We really hope that both countries will be able to return to normal economic activity as soon as possible».

Taking into account the restrictions, Japan’s approval for the export of chemical materials could take up to 90 days, resulting in a slowdown in shipments.

Export restrictions illustrate how Japan controls a vital link in the global supply chain. It remains a major player in specialized chip components, although South Korea overtook it as a chip maker many years ago..

At a New York event to mark the launch of the new flagship phone, the head of Samsung’s mobile division told reporters that he could not rule out a possible impact on the supply chain for smartphone manufacturing if the restrictions drag on for more than four months..

Tokyo Ohka Kogyo is up 3.9% and Stella Chemifa is up 10.1% since the last export approval. Tokyo Ohka Kogyo makes photoresists and Stella Chemifa makes hydrogen fluoride, both subject to export restrictions.

South Korean chipmakers are at a standstill in their quest to find alternatives for key Japanese materials that have been restricted, raising the likelihood of serious disruption in the coming months..

Japan resumes exports to South Korea, but with a warning

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