South Korea will remove Japan from its so-called white list of favored trading partners as retaliation against a similar measure by its neighbor, in a sign of deepening tensions between the two East Asian economies.
South Korean Finance Minister Hong Nam-ki said Aug. 2 that the government will also file a complaint with the World Trade Organization against Japan's export curbs, Yonhap News Agency reported.
Earlier, Japan's Cabinet approved the removal of South Korea from a list of preferred trading partners, effective Aug. 28. Japanese Industry Minister Hiroshige Seko said in a press briefing that the Cabinet took national security into account in making its decision, Reuters reported.
The removal from the so-called white list will strip South Korea of minimum export control privileges with Japan. Exporters to South Korea will now also have to obtain individual licenses before transporting goods that could be used for military purposes.
The decision comes about a month after Japan subjected certain high-tech material exports to South Korea to stricter controls, amid a dispute over a court case involving compensation for forced labor during World War II. Fluorinated polyimide, resists and hydrogen fluoride, which used in making semiconductors and other smartphone components, currently need individual licenses before they can be exported to South Korea.
Moody's said Japan's ruling is credit negative for many South Korean companies in industrial sectors.
However, the rating agency expects the impact to be manageable for most of the affected firms, unless Japan decides to effectively implement an export ban, which could lead to material production disruptions in South Korea's semiconductor, display and smartphone manufacturing sectors.
South Korean chipmaker SK Hynix Inc. ended the session down more than 2% on Aug. 2, while smartphone giant Samsung Electronics Co. Ltd. fell nearly 1%.