A joint venture formed in 2019 by two leading Japanese and South Korean companies has been hailed as a beacon of cooperation amid strained diplomatic ties.
Executives at South Korea’s Naver and Japan’s SoftBank Group said they would jointly own the operator of Line, a messaging app developed in South Korea and popular in Japan. They gave the project a codename that emphasized collaboration: Gaia.
Five years later, Japan and South Korea have made significant progress in reducing long-standing historical tensions. But a dispute has arisen over the ownership of the Naver-SoftBank company, and diplomats and international relations experts fear it could put renewed strain on relations between the countries.
Japan and South Korea, both important U.S. allies in Asia, have sensitive histories. Japan colonized Korea from 1910 until Japan’s surrender in World War II in 1945, and Japan and South Korea often fought over territory and geopolitical differences.
“As we have seen many times in the past, relations between Japan and Korea are shifting, and minor points of tension – whether in wartime or in modern times – can quickly escalate and have implications for defense and diplomacy more broadly,” Maiko said Takeuchi, regional director at CCSI, a group in New York that advises governments on international security issues.
Given concerns about North Korean nuclear proliferation and increasing instability in the region, the stakes are high, Ms. Takeuchi said. “There is a strong feeling in the United States and elsewhere that maintaining good relations between Japan and Korea is more important than ever,” she said.
The Line messaging platform at the center of the dispute was launched in Japan in 2011 by Naver, the operator of South Korea’s leading search engine. After the Tohoku earthquake and tsunami that same year, when telephone lines were cut in Japan, Line allowed users to communicate via an Internet connection.
Since then, Line, known for its screen stickers featuring expressive rabbits and bears, has become Japan’s most popular messaging app, with hundreds of millions of users and expansion into Thailand, Taiwan and Indonesia.
In 2019, SoftBank founder Masayoshi Son and Hae-Jin Lee, a co-founder of Naver, agreed to form a 50:50 joint venture that would operate Line indirectly. Reports referred to the agreement as the “Son-Lee alliance” when Japan-South Korean relations were at an all-time low.
Last year, South Korea’s Supreme Court ordered several Japanese companies to compensate South Koreans who were forced to work in their factories during World War II. Japan responded to the court order in 2019 by imposing export restrictions on chemicals essential to South Korea’s semiconductor industry.
The countries’ top politicians did not comment and there was talk of terminating the intelligence sharing agreements. This was a major problem for the United States, which had tried to persuade Japan and South Korea to cooperate to meet the challenges posed by China and North Korea.
But then relations between South Korea and Japan improved significantly. In March 2023, South Korean President Yoon Suk Yeol announced a plan to compensate former forced laborers with money from a government-run fund. Later that month, Mr. Yoon met in person with Japanese Prime Minister Fumio Kishida – the first such meeting in 12 years – and Japan lifted its restrictions on exports of semiconductor materials.
But late last year, cracks began to open in the Naver-Softbank company.
Line’s operator, a company called LY Corporation, said in November that a third party had gained unauthorized access to its systems through Naver’s cloud storage system. In return, Japan’s communications ministry issued an ambiguous statement that was widely interpreted as an order for Naver to sell its stake in its joint venture.
The move caused a stir in South Korea. Some analysts and politicians interpreted it as an attempt by Japan to use political pressure to weaken Naver, one of South Korea’s largest companies. Naver’s union said it opposed any sale, and the company’s chief executive, Choi Soo-Yeon, said she found the Japanese government’s directive “highly unusual.”
An editorial in the Korea Economic Daily last month equated the move with government interference. “That the Japanese government is now calling for Naver’s resignation after all the hard work and investment seems contrary to the principles of a civilized nation,” the article said.
In South Korea, opposition parties have criticized Mr. Yoon for taking what they see as an overly conciliatory stance toward Japan, citing Naver as the latest victim of the policy. Cho Kuk, a key ally of the former South Korean president, called Yoon’s stance against Japan “humiliating” and accused the president of not supporting a successful domestic business.
In a briefing in May, Sung Tae-yoon, Mr. Yoon’s chief of staff, said that as long as Line’s operator was able to present satisfactory plans to strengthen security, the Japanese government should not take any “adverse action” in a sale of the Naver -Force shares. The South Korean government will “continue to ensure that Korean companies abroad are not subjected to discriminatory measures or unfair treatment,” he said.
According to the companies, SoftBank and Naver are discussing possible changes to the Line operator’s ownership structure.
Naver executives have remained largely silent on the issue. A Naver spokeswoman said the company was open to all opportunities. A spokesman for Japan’s communications ministry said it was up to the line operator to decide how to improve its safety management.
Leaders on both the Japanese and South Korean sides appear determined to prevent the dispute over the line from escalating. Mr. Kishida and Mr. Yoon agreed in late May that the dispute should not affect diplomatic relations.
In the past, even seemingly insignificant incidents could lead to protracted diplomatic conflicts. In 2018, when a South Korean naval vessel was accused of pointing its fire control radar at a Japanese aircraft flying over the Sea of Japan, the two countries responded by halting defense exchanges. This stalemate only eased this month.
How Japan ultimately handles the issue of Line’s ownership could affect the future development of Japan-Korean relations, said Yul Sohn, president of the East Asia Institute, a think tank in Seoul.
“On the Korean side, the general public believes that the Yoon government has shown its intentions and the cup is still half empty, waiting for a response from Japan,” he said.
If Japan shows it is willing to reciprocate, even through a gesture like a concession related to the Line dispute, Mr. Yoon could use that to maneuver further cooperation, Mr. Sohn said.
“We are in a period of recovery in relations, but both parties are very aware of what happened in the past,” he said. “Even if a stronger foundation is built, there are still cracks to be expected.”
John Yoon contributed reporting from Seoul.
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2024-06-24 04:01:09
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