Can the reconciliation between Japan and South Korea last?, Economic "wheels" accelerating operation, depth | Restarting currency swap agreements after 8 years | Restarting financial dialogue | Japan and South Korea
Today, the "Japan South Korea Financial Dialogue" has resumed in Tokyo, Japan after a 7-year hiatus. As expected by the outside world, the finance ministers of the two countries have agreed to restart the currency swap agreement, with a scale of 10 billion US dollars, and have agreed to strengthen cooperation in areas such as supply chain.
Against the backdrop of continuously improving relations between the two countries, the above progress is seen as the latest footnote to the accelerated operation of the economic "wheels". What significance does it have for the development of economic, trade, and financial cooperation between the two countries? What impact will it have on the relationship and regional cooperation between the two countries?
Economic "wheel" acceleration
The Japan South Korea Financial Dialogue began in 2006 as a regular exchange mechanism attended by finance ministers and other officials from both countries, aimed at promoting cooperation in finance and finance. It has been held seven times before, with the most recent being held in Seoul in August 2016. Subsequently, due to historical and territorial issues, the mechanism has been suspended to this day.
Since March this year, with the normalization process of bilateral relations initiated by the summit talks, exchanges between the economic "command towers" have heated up, and the eighth "Japan South Korea Financial Dialogue" has also been put on the agenda.
On the 29th, according to the introductions made by Japanese Finance Minister Junichi Suzuki and South Korean Deputy Prime Minister of Economy and Minister of Planning and Finance, Guan Qiuqing ho, after the talks, the resumption of the currency swap agreement between the two countries can be regarded as the biggest achievement of the talks.
This is an emergency joint guarantee measure for the two countries to cope with financial turbulence. When one country falls into a financial crisis, the other country provides currency financing and support for its economy. Japan and South Korea signed the agreement for the first time in July 2001, with a scale of 2 billion US dollars; By the end of 2011, after experiencing the baptism of the global financial crisis and the European fiscal crisis, the scale of swaps had increased to 70 billion US dollars. However, after the cooling of bilateral relations in 2012, the scale of exchanges continued to shrink; After the expiration of the agreement in February 2015, both parties were unable to renew it.
After 8 years, the currency swap agreement has finally restarted and has been given positive significance by public opinion. At the same time, the finance ministers of the two countries also agreed to deepen cooperation in the fields of investment, finance, and taxation, and make joint efforts to effectively carry out supply chain cooperation.
Analysts believe that the resumption of financial dialogue and the renewal of currency swap agreements are the implementation of the consensus reached at the March summit, releasing a signal of increased mutual trust between the two countries and efforts to strategically enhance bilateral relations.
"The meeting between the finance ministers of the two countries after many years is not only a result of increasing mutual trust, but also helps to further enhance trust between the two countries." Zhan Debin, director of the Korean Peninsula Research Center at Shanghai University of International Business and Economics, pointed out that currency swap agreements are an important means of promoting mutual trust. Its significance is particularly prominent for South Korea, as it can play an important role in preventing potential problems.
"At the beginning of this century, South Korea's financial system was relatively fragile and greatly affected by external risks. The outside world has always been concerned about the possibility of a foreign exchange crisis in South Korea." Zhan Debin said that because of this, the South Korean government has always attached great importance to financial stability issues, hoping to expand foreign exchange reserves through currency swaps and other forms, and boost external confidence in the South Korean foreign exchange market. Not only Japan and South Korea, but also China and South Korea have currency swap agreements that are still valid.
Chen Youjun, a researcher at the Shanghai Institute of International Studies, believes that the resumption of financial dialogue is a continuation of the previous summit between the two countries and a corresponding manifestation of the easing of political relations at the economic level. The restoration of currency swap agreements is an institutional arrangement for establishing closer strategic economic relations between the two countries, which helps to maintain financial stability and promote orderly economic and trade cooperation. To a certain extent, it can serve as a stabilizer and ballast.
As for the other cooperation consensus reached by both sides, "for now, being pragmatic is more important than being pragmatic." Chen Youjun said that due to the previous deterioration of political relations between the two countries, cooperation in various fields between Japan and South Korea has been interrupted for two to three years and is still in the process of restarting. Therefore, the economic authorities of the two countries also want to accelerate their pace and catch up with the pace of other departments such as diplomacy, in order to achieve resonance with the same frequency and better promote the joint advancement of the two "wheels" of politics and economy, in order to promote the strategic improvement of Japan South Korea relations.
Is a ceasefire beneficial to the United States?
Seemingly to create an atmosphere for the financial dialogue between the two countries, just two days ago, there was another piece of "good news" in the business community of South Korea and Japan. After about two months of approval, the Japanese government has decided to reintroduce South Korea into the export preferential "whitelist".
The public opinion of the two countries has responded positively, lamenting that Japan and South Korea have completely cleared up their past grievances. The US Ambassador to Japan, Emmanuel, praised the two allies who prioritize promoting regional prosperity over politics.
Chen Youjun believes that Japan's move highlights a dual consideration of politics and economy.
On the one hand, it is driven by political factors and aims to demonstrate a conciliatory stance. The origin of the "whitelist" incident is the tense political relationship between the two countries and Japan's trade sanctions against South Korea. Now, with the easing of political relations, Japan needs to take political action to lift sanctions.
On the other hand, the Japanese government is also considering responding to the anxiety of domestic manufacturers and helping them regain their lost market share in South Korea. During the three years of Japan's trade sanctions against South Korea, although South Korea still relies entirely on Japan for some key semiconductor raw materials, it has also found alternatives or achieved partial substitution in other raw materials. Therefore, Japanese manufacturers have a certain level of anxiety.
Zhan Debin pointed out that South Korea's return to the "whitelist" is more symbolic than practical.
Firstly, Japan implemented three key raw material export controls on South Korea back then, but with an increase in customs barriers, not a complete embargo. South Korea can still achieve imports through many detours. Now, South Korea's return to the "whitelist" will not substantially change the trade structure between the two countries.
From the perspective of posture, the temperature difference in economic cooperation between the two countries is still ongoing. Japan has always been less concerned about South Korea, believing that South Korea has more demand for it. South Korea does indeed have a technological dependence on Japan. Over the past few decades, most of the trade surplus earned by South Korea from China has been spent on Japan.
However, the end of the "trade war" between Japan and South Korea may have a ripple effect at the regional level, which is worth paying attention to.
"Against the backdrop of the United States' intensified efforts to build a so-called 'chip alliance', the return of South Korea and Japan to the 'whitelist' will have a positive effect on the smoother restructuring of the US ally supply chain." Zhan Debin pointed out that the United States hopes to integrate various allies and enable them to leverage their respective advantages. In the past, South Korea used this idea from the US as a leverage and secretly demanded that the US pressure Japan and lift trade sanctions against South Korea. Now, the lifting of trade restrictions between South Korea and Japan may be helpful for the United States to achieve its goals
Chen Youjun believes that there is still uncertainty in the so-called semiconductor supply chain coordination currently underway in the United States. One important reason is that it cannot effectively distribute economic benefits during the coordination process, which inevitably leads to uneven and unfair distribution. Therefore, it is still unknown whether other countries can fully comply with the orders and institutional arrangements of the United States.
Is there still a "dark cloud" over reconciliation?
On the same day as the 27th, while the trade between Japan and South Korea was being loosened, the technology industry was also accelerating its efforts to break the ice.
The Ministry of Science and Technology of South Korea and the Ministry of Education, Culture, Sports, Science and Technology of Japan held a ministerial level meeting to discuss deepening cooperation in the fields of science and cutting-edge technology, and establishing a new routine consultation mechanism, marking the resumption of the 12 year interrupted science and technology cooperation mechanism between the two countries.
From politics to economy, and then to technology, foreign media have lamented that the speed of improvement in Japan South Korea relations is surprising.
However, the public opinion of both countries still has concerns and doubts about the prospects of reconciliation. For example, the upcoming sensitive event of Fukushima nuclear wastewater discharge into the sea may become a "dark cloud" that covers the improvement of bilateral relations. For example, some Japanese scholars wonder why the Biden administration always emphasizes strengthening unity between Japan and South Korea as its diplomatic achievement? Is the Kishida government really bowing to the United States?
"From a Japanese perspective, the improvement in this round of relations is the result of the joint action of internal and external factors, with external factors outweighing internal factors," Chen Youjun pointed out.
Externally, the main driving force for easing comes from the United States. It hopes to integrate its allies in the Asia Pacific region, especially in East Asia, to reconcile Japan and South Korea, and form a trilateral composite alliance between the United States, Japan, and South Korea, covering multiple fields such as politics, diplomacy, economy, and security, not limited to traditional security alliances.
Internally, the Kishida government hopes to highlight its policy proposals by changing the previous government's foreign policy, and also wants to use diplomatic achievements to make up for domestic shortcomings, maintain its ruling position, and monopolize the political arena.
"Japan's trade sanctions against South Korea were a landmark policy of then Prime Minister Shinzo Abe. Abe himself had strong policy leadership and influence. Under the shadow of Abe's 8-year rule, his successors gave the impression of being a 'weak prime minister'. The outside world would use 'Xiao Gui Cao Sui' to summarize their role in policy." Chen Youjun said, but Kishida was unwilling to accept this fixed view and hoped to demonstrate his independence and influence in foreign policy by easing relations with South Korea.
Looking ahead to the development of the relationship between the two countries, "there is still a shadow over the reconciliation between South Korea and Japan, highlighted by the differences in opinions between officials and civilians, which will create a tension." Zhan Debin pointed out that the improvement of this round of relationship is mainly at the government level of the two countries, rather than at the civilian level. The adjustment of South Korea's policy towards Japan is mainly based on the judgment of conservative groups within the government towards Japan, which has been forcefully promoted and has not received enough public support. Therefore, reconciliation still has fragility.
"Japan South Korea relations are on an overall track of improvement, but there are also flaws." Chen Youjun said that not only is the issue of nuclear wastewater, but many structural contradictions between the two countries have not been resolved. For example, there is still no complete consensus on labor issues in South Korea, and there is no basic consensus between the two countries on the issue of comfort women. Therefore, there will definitely be many difficulties in the future. But if both governments have a strong desire to improve their relationship strategically, they may use some "creative" political maneuvers to avoid a huge setback in their relationship.
