by THE EDITORS/ pic by BLOOMBERG

VICTORY in Japan’s upper house elections over the weekend gives Prime Minister Shinzo Abe (picture) the political clout to do many things. The first should be to extricate Japan from the foolish trade war he’s launched against neighbouring South Korea.

Abe’s government started the confrontation earlier this month when it restricted exports to South Korea of three materials critical to the manufacture of semiconductors and smartphone displays, thereby threatening to disrupt tightly-linked supply chains and drive up the price of everything from memory chips to iPhones.

Japanese officials have claimed that the measure was intended to prevent high-tech exports from being illegally transferred to North Korea. But the move was clearly intended as retaliation for recent South Korean court decisions awarding damages to labourers forced to work for Japanese companies during the colonial period.

Both sides are now trapped in their positions. Japan contends that the 1965 treaty reestablishing diplomatic relations between the two countries, under which it gave Seoul US$500 million (RM2.06 billion) in aid and low-interest loans, settled all compensation claims “completely and finally”. South Korea, meanwhile, has rejected Abe’s call for third-party arbitration, proposing instead that they form a joint fund to pay the court awards.

The US, which has traditionally smoothed over tensions between its two allies, has been slow to intervene. If nothing changes, the conflict will likely widen: As soon as this week, Japan may remove South Korea from a “white list” of countries exempt from most restrictions on so-called dual-use exports.

That would be vastly more disruptive than the current curbs and could shrink investment and employment in South Korea.

Both countries, it’s true, have reason to feel aggrieved. South Korean President Moon Jae-in undercut his own argument in favour of a compensation fund by scrapping a similar arrangement approved by his predecessor, meant to settle the claims of former Korean “comfort women” abused during World War II. That decision only fuelled the narrative, common in Japan, that no amount of apologies or compensation would ever be enough.

Abe, for his part, is abusing trade measures to resolve a political dispute. His move echoes the bullying tactics favoured by China and US President Donald Trump. It’s especially hypocritical for a leader who had, till now, won well-deserved plaudits for strengthening the global trading order.

The damage could go well beyond Abe’s reputation. Japanese suppliers will lose market share — and their reputation for reliability — if some of their biggest customers are forced to look elsewhere. South Korea will no doubt seek to retaliate if Japan proceeds with its “white list” threat; boycotts of Japanese goods are already spreading.

Mounting tensions risk undermining security ties. And the spat could needlessly complicate relations with the Trump administration, even as Abe seeks to finalise a limited trade agreement with the US.

There’s an obvious compromise to be had: Japan should lift the new export controls and resist adding more, while South Korea should agree to arbitration over the forced-labour issue.

Having started this fight, and having safely survived the elections, Abe should make the first move. The US, whose support Moon desperately needs to pursue his peace efforts with North Korea, should ensure the South Korean president swiftly reciprocates.

Meanwhile, both sides should commit to exploring more creative solutions to their lingering historical disputes. No one expects such deeply felt grievances to be healed easily.

But both Moon and Abe should remember that their job is to tamp down such tensions, not inflame them. — Bloomberg

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