Analysis by Péter Goreczky and Tibor Mezei
In the last decade, the value of bilateral trade between South Korea and Japan has shown a downward trend, and a ‘mini trade war’ and decoupling efforts to create more resilient supply chains in some economic segments have the potential to narrow trade relations further. This regression in bilateral economic cooperation is intrinsically connected to the deterioration of political relations between the two countries, and it was the re-emergence of unresolved historical differences on the political agenda that generated the tension between Japan and South Korea. On the other hand, the participation of the two nations in the Regional Comprehensive Economic Partnership (RCEP) can be evaluated as an important first step towards intensifying trade relations. In addition, corporate business relations and the private sector is the most important bridge between the two economies. The common challenges and opportunities of a new economic era and a changing geopolitical environment may induce Japan and South Korea to improve political cooperation and lay aside their differences regarding interpretations of historical problems. The paper concludes that the regression in bilateral relations during the past seven years has not taken place because the disagreement between the two sides has become intractable but due to an unfortunate series of occurrences in the political field.
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