Starting Thursday, Tokyo plans to curb Korea-bound shipments of three materials used for chip and display production, in what is viewed as retaliation for the recent Korean court decisions on wartime labor reparations.
The measure comes as Japan has grown frustrated with what it sees as a lack of action by Seoul to address issues related to the top court ruling last October, which ordered Nippon Steel to compensate for forced labour during World War Two.
"In addition to the fact that it has become hard to work on export control with South Korea under a relation of trust, we have also seen inappropriate cases in connection with export control as it relates to South Korea", he told reporters.
Japan will stop preferential treatment for shipments of these three materials to South Korea, requiring exporters to seek permission each time they want to ship, which takes about 90 days, the ministry official said.
South Korea reacted with consternation and its trade minister said Seoul would file a complaint with the rules-making World Trade Organization.
Japan will restrict the export to South Korea of key chemicals used in the production of electronics, reports Japanese newspaper Sankei.
The imposition of export controls, which effectively ends Japan's preferential trade treatment of South Korea, means that it could take up to 90 days for exporters to obtain the required permission, according to global media reports.
South Korean Trade, Industry and Energy Minister Sung Yun-mo, center, speaks during a meeting at Korea Trade Insurance Corporation in Seoul, South Korea, Monday, July 1, 2019. The WTO lawsuit cannot offer relief to companies as the review is a lengthy process that could drag on for months or sometimes years, experts said.
Japan's METI has made individual applications mandatory, for export of fluorinated polyimide and hydrogen fluoride, to South Korea. "While we have tried to find alternative sources to diversify risk, it is not an easy task", the source said.
The restrictions to be put in place will likely affect South Korean chipmakers like Samsung Electronics Co. and there are growing concerns that Japanese exporters will also take a hit.
At the governmental level, Japan's initial efforts to solve the dispute through bilateral consultations failed after South Korea did not respond.
Japan, says the issue of forced labor was fully settled in 1965 when the two countries restored diplomatic ties.
"The bickering will leave both Tokyo and Seoul as losers in the end without a victor, damaging the two economically".
Morita Chemical Industries Co., a leading manufacturer of hydrogen fluoride, which dissolves parts of semiconductor substrates that are unnecessary in circuit formation, said the company hopes to continue exports to South Korea even though more work is expected to be required, such as submitting necessary documents in advance.
On Japan's white list are 27 countries, from Germany to South Korea, Britain and the United States.