If Ulrike Schaede is right — and I wouldn’t bet against her — then the decision last year to tighten export control vis-a-vis South Korea is a disastrous move that could do far greater damage to Japan than it will to that country.
Regardless of whether it was driven by genuine concerns about trade diversion and the proliferation of weapons of mass destruction, or pique at court rulings in Seoul on the issue of wartime labor, the Japanese government’s decision last summer to require approval for each export of three specialty chemicals to South Korea and remove it from the "whitelist" of countries entitled to preferential trade treatment threatens Japan’s most visionary companies.
Every government needs to assess the tension between the satisfaction (geopolitical and emotional) that follows the imposition of sanctions and the potential for blowback as the target attempts to reduce the pressure and the pain. In this case, South Korea is reacting as should have been anticipated — and as studies of sanctions predicted — by creating domestic substitutes, undercutting not only the intended impact of the sanctions but damaging some of Japanese most cutting-edge businesses as well.