Business

For Japan's economy, worst of South Korea boycott may have passed

Kyodo

While a South Korean consumer boycott of Japanese products continues in the wake of a prolonged dispute over wartime history and trade, economists say Japan has already seen the worst of its economic repercussions.

Concerns had grown among businesses as moves to shun Japanese brands quickly spread, and cancellations of flights from South Korea to Japan increased in number.

Among Japanese firms operating in South Korea, Fast Retailing Co.’s Uniqlo casual clothing chain became one of the biggest targets of the boycott.

Sportswear maker Descente Ltd. has cut its earnings forecast for the current business year through March, and now expects group net profit to plunge 82.3 percent to ¥700 million ($6.5 million) — down from the previously forecast ¥5.30 billion.

And with South Korean supermarkets and convenience stores pulling Japanese beers from their shelves, Japan’s Finance Ministry said last month that the value of the nation’s beer exports to South Korea had plummeted 99.9 percent in September from a year earlier, to just ¥588,000.

Bilateral ties rapidly deteriorated after South Korea’s Supreme Court ordered a Japanese firm in October last year to pay compensation for South Koreans pressed into forced labor during Japan’s colonial rule of the Korean Peninsula, between 1910 and 1945. A similar ruling was reached against another Japanese company the following month. Tokyo maintains that wartime issues were settled by a 1965 bilateral agreement.

The diplomatic row then further deepened in December when a South Korean destroyer allegedly locked its fire-control radar onto a Japanese patrol plane within Japan’s exclusive economic zone. Seoul later alleged that the plane had deliberately flown at low altitude.

In July, Japan imposed stricter export controls on some materials that are key for South Korea’s semiconductor-makers, which Seoul saw as retaliation for the court rulings, prompting the boycott movement.

Experts say, however, that the effects of the boycott are unlikely to keep spreading.

“A boycott campaign targets a portion of consumer goods, and cannot have a macroeconomic impact,” said Yuichi Takayasu, a professor specializing in South Korea’s economy at Daito Bunka University in Tokyo and a former government official who was once posted to the Japanese Embassy in Seoul.

While all four major Japanese brewers admitted they had been affected by the boycott, the impact on the industry overall has been limited, as shipments to South Korea account for only a small portion of their businesses.

“Asahi brand products were the No. 1 import beer for the eighth consecutive year through 2018 in South Korea, but it seems to be difficult to retain the position this year due partly to the boycott,” said Kristin Chiu, public relations manager at Asahi Group Holdings Ltd., which owns Asahi Breweries Ltd.

But another major brewer, Suntory Beer Ltd., said the boycott has had almost no impact on its performance because shipments of its flagship The Premium Malt’s to South Korea accounted for only around 0.5 percent of its entire beer business.

As for the tourism industry, some tourist destinations geographically close to South Korea — such as the hot spring resort town of Beppu on Kyushu — were affected.

Ryoichi Namba, chief economist at the Chubu Region Institute for Social and Economic Research, said, however, that spending by South Korean travelers is not a large factor for the industry.

“There is no need to exaggerate the effect of the worsened Japan-South Korean ties on the Japanese economy,” said Namba.

The sharp decrease in the number of visitors mostly affected South Korea’s airlines and travel agencies, some experts say.

Low-cost carrier Air Seoul Inc., a wholly owned unit of South Korean carrier Asiana Airlines Inc., plans to close half of its 12 offices in Japan, sources close to the matter said recently.

Daito Bunka’s Takayasu said, “While the bilateral political wrangling is expected to linger, the ideal thing is to separate economic and political issues to maintain economic ties” between the two countries.