Japan, South Korea Agree to Mend Ties After Ice-Breaking Talks

(Bloomberg) -- Japanese Prime Minister Shinzo Abe and South Korean premier Lee Nak-yon agreed they must work to ease the feud between the two neighbors that has spilled over into trade and security at their highest-level meeting in more than a year.

Both sides issued statements expressing a desire to repair ties after a roughly 20-minute meeting between the two on Thursday. Lee delivered a letter to Abe from South Korean President Moon Jae-in that, according to the Yonhap News Agency, described Japan as a valuable partner in securing a lasting peace with North Korea and urged efforts to resolve the disputes.

“It’s important that relations must not be left in their current state,” Abe told Lee, describing them as “very severe,” according to a statement from Japan’s Ministry of Foreign Affairs. Lee said in a tweet that he urged Abe to continue communications, adding “we will make an effort to solve issues that we have different positions on through wisdom.”

Lee added the “bilateral talks are now picking up some speed,” Yonhap News reported. The meeting is the most positive signal since South Korean courts issued a series of rulings last year backing the claims of Koreans forced to work for Japanese companies during the country’s 1910-45 occupation of the Korean Peninsula.

Abe last met Moon in September 2018 and passed up a chance to meet him for formal talks during Group of 20 events in Osaka in June. They are both expected to attend an Association of Southeast Asian Nations summit in Bangkok at the start of November, which could afford them a chance for talks.

“The meeting helped set communications back to a more normal channel, but far more action was needed,” said Kim Tai-ki, an economics professor at Dankook University, near Seoul. “With the key issue being trust, it will take much longer than top-level photo opportunities for it to actually rebuild,” he said.|

As the meeting started in Tokyo, South Korea’s Foreign Minister Kang Kyung-hwa sent mixed signals by offering support for the discussions and cautioning Japan that it needs to withdraw its export curbs for ties to improve. Japan’s top government spokesman, Yoshihide Suga, told a briefing in Tokyo that Abe reaffirmed Japan’s position on the labor issue and wanted a reasonable response from Seoul.

There was muted market reaction in both countries. Japan’s Nikkei 225 Index and South Korea’s Kospi Index both closed slightly higher.

Economic worries in Japan and South Korea have mounted as they have both been in the fallout from the trade war between their major partners the U.S. and China. Consumer spending in Japan is set to cool after Abe hiked the sales tax on Oct. 1 from 8% to 10% while South Korea’s economy is on track for the smallest expansion since the global financial crisis as trade uncertainties weighed on investment.

Tensions have rapidly escalated, with Japan striking South Korea from a list of trusted export destinations and imposing restrictions on the sale of specialized materials essential to the country’s semiconductor- and display-manufacturing industries. South Korea responded by announcing its withdrawal from an intelligence-sharing pact, as its citizens boycotted Japanese goods and travel.

After largely sitting on the sidelines as tensions re-emerged, the Trump administration has recently pushed the two sides to try to work out their differences. The U.S. has been particularly critical of South Korea’s exit from the intelligence pact, since it’s relying on cooperation between its two closest Asian allies to help counter China and North Korea.

The pretext for Lee’s visit was his attendance at Emperor Naruhito’s enthronement ceremony Tuesday.

Each country is the other’s third-largest trading partner and neither can afford a damaging economic fight as global growth cools.

“The current dismal situation does not benefit either country,” said Kak Soo Shin, South Korea’s ambassador to Japan from 2011 to 2013.

--With assistance from Sophie Jackman, Shinhye Kang, Eric Lam, Kanga Kong and Muneeza Naqvi.

To contact the reporters on this story: Jihye Lee in Seoul at jlee2352@bloomberg.net;Emi Nobuhiro in Tokyo at enobuhiro@bloomberg.net

To contact the editors responsible for this story: Brendan Scott at bscott66@bloomberg.net, Jon Herskovitz

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