The Japan-South Korea Dispute: Part I

Since early July, the financial press has been reporting on a continued trade spat between Japan and South Korea. The reports have focused on a series of tit-for-tat trade restrictions the countries have imposed on each other, which are ostensibly tied to South Korean anger over Japan’s behavior in the runup to World War II. The reports rightly point to the conflict as an example of how trade policy has been weaponized by populist, nationalist leaders around the world, but we think it reflects much more than that. For one thing, the dispute is only the latest chapter in a long history of conflict between the Koreans and the Japanese – a centuries-old story of mutual fear and loathing, colonization and rebellion, and even the assassination of a powerful, beautiful queen. Just as important, the conflict is an example of how the U.S. retreat from its traditional hegemonic leadership role has unleashed dangerous conflicts that had previously been frozen.

In Part I of this report, we’ll show how today’s dispute fits into the history of Japanese-Korean relations over the last several centuries and demonstrate that the enmity between these two ancient peoples is probably much worse than most U.S. observers realize. In Part II, we’ll discuss how the changing U.S. approach to international relations has allowed the dispute to grow. We’ll also discuss the likely ramifications for investors.

Japan and Korea: Too Close for Comfort

Without reference to a map of northeast Asia, it’s easy to think of Japan and Korea in isolation – Japan as a long, mountainous chain of islands somewhere off the Asian coast in the Pacific Ocean, and Korea as a small, frigid peninsula jutting down from northern China. In reality, the Japanese islands of Kyushu and Honshu lie just 120 miles off the southern coast of Korea (Figure 1). On a clear day, a hiker mounting the summit of Japan’s Tsushima Island, in the middle of the Korea Strait, can just make out the hills and mountains of Korea to the north. Such a short maritime distance has proven easily surmountable for at least two millennia. Since ancient times, the Strait has served not as a barrier but as a two-way bridge for settlers, traders, scholars, missionaries, diplomats, and soldiers. From the perspective of the Koreans, that means their homeland is at risk of invasion from both the Chinese and Russians to the north and the Japanese to the south. From the perspective of the Japanese, it means Korea is the most likely conduit from which they could be attacked.

Figure 1.

(Source: Wikimedia Commons)

Attacked by Japan, Then by China

Despite their vulnerability to China’s power, the Koreans have embraced and absorbed many elements of Chinese culture. Whether they were enjoying a period of national unity or suffering through a period of division, the Koreans often looked to China for inspiration in government, law, religion, technology, and the arts. Prior to the Mongol invasions, for example, Korea became an important center of Chinese-style Buddhism and Confucianism. Likewise, the Chinese saw the Koreans as important allies and vassals. In 1592, when the Japanese daimyo Hideyoshi sent 158,000 troops into Korea on their way to conquer the Ming Dynasty, Chinese and Korean forces fought shoulder-to-shoulder to turn them back.

Unfortunately, however, the Koreans also know what it’s like to be invaded by the Chinese. As it turns out, the cost of the campaign against Hideyoshi sparked a political crisis in Manchuria (located in northeastern China). Not only did Manchu rebels overthrow the Ming Dynasty in 1644, replacing it with the Qing Dynasty, but they also attacked the Koreans in retaliation for their alliance with the Ming. Together, these long-ago invasions from Japan and China have given the Koreans a sense that they are a distinct people with common interests. Koreans tend to discount the Manchu invasion as an illegitimate act of barbarian rebels, but they look on the Japanese attack under Hideyoshi as the greater insult to their nationhood.