Advertisement
Features

Japan versus South Korea: Asia’s other trade war

Decades of bickering between South Korea and Japan are feeding an increasingly nasty trade dispute.

Seoul's Myeong-Dong district at night © Alamy
Korean equities look "screamimgly cheap"

"Decades of bickering" between South Korea and Japan are feeding an increasingly nasty trade dispute, says The Economist. In August, Tokyo removed its neighbour from a "White List" of trusted export destinations, prompting Seoul to respond in kind. South Korea's chipmakers rely on imports of chemicals from Japan, but Tokyo is "signalling that it could at any moment cripple" Korea's biggest industry, a "wildly aggressive, disproportionate threat".

Advertisement - Article continues below

The new trade war is not helping South Korea's export-dependent economy, say Sam Kim and Hooyeon Kim in Bloomberg. Korea's trade data serves "as a barometer of global demand". Yet exports fell by 13.6% year-on-year in August, the ninth consecutive month of contraction.

Removal from the White List means that Japanese exporters will have to go through a lengthy application process to sell certain goods to Korea, say Alex Holmes and Gareth Leather of Capital Economics. The knock-on effects could disrupt technology supply chains across Asia. Korea produces 40% of the world's liquid crystal displays and 20% of its semiconductors. "Vietnam, which sources over 20% of its intermediate goods imports from South Korea, is likely to be worse affected."

Korean equities now "look screamingly cheap", says Mike Bird in The Wall Street Journal. On a price-to-book ratio of 0.8, they are less expensive than "at almost any time in the past 15 years". Yet falling global demand for cars, smartphones and computers leaves Korean industry in a bad way regardless of the trade wars. Keep your distance. As for Japan, it has worries of its own. Strong employment has so far failed to generate solid wage growth, and next month's sales-tax rise could undermine tenuous economic growth.

Advertisement
Advertisement

Recommended

How long can the good times roll?
Economy

How long can the good times roll?

Despite all the doom and gloom that has dominated our headlines for most of 2019, Britain and most of the rest of the developing world is currently en…
19 Dec 2019
If companies have too much power, we need more competition, not higher taxes
US Economy

If companies have too much power, we need more competition, not higher taxes

Free-market capitalism is breaking down and that is going to lead to higher taxes down the line. John Stepek explains why that matters for investors.
11 Aug 2020
The charts that matter: precious metals, longevity and a cure for baldness
Global Economy

The charts that matter: precious metals, longevity and a cure for baldness

As the gold price presses on to new highs, John Stepek looks at he charts that matter most to the global economy.
8 Aug 2020
South Africa faces a big economic storm
Emerging markets

South Africa faces a big economic storm

Recession hit South Africa has been the fifth-worst hit country in the world measured by the number of coronavirus cases. The local stockmarket has so…
7 Aug 2020

Most Popular

Eagle Lightweight GT: the reincarnation of the E-type Jag
Toys and gadgets

Eagle Lightweight GT: the reincarnation of the E-type Jag

Jaguar’s classic E-type sports car has been reinvented for the modern age. The result – the Eagle Lightweight GT – is a thing of beauty.
7 Aug 2020
Should you take advantage of the UK’s new breed of domestic holidaymakers?
Buy to let

Should you take advantage of the UK’s new breed of domestic holidaymakers?

With Britons choosing to holiday in the UK this year, the owners of the country’s holiday cottages are cleaning up. Should you buy in, too? Merryn? So…
10 Aug 2020
The pound has been trending higher against the dollar – will it last?
Sponsored

The pound has been trending higher against the dollar – will it last?

Sterling has been rising against the dollar. Dominic Frisby sets his trend lines in the charts to see where the pound is heading next.
10 Aug 2020