Trade War 2nd Front Opens Up - Japan Removes South Korea From Export "White List"

President Trump's 'good friend', Prime Minister Shinzo Abe has formalized Japan's decision to remove South Korea from its "white list" of 27 countries with preferential trade status, a move that further fuels bilateral tensions.

The move follows a decision by Japan on July 4 to tighten controls on exports for three chemicals used in the production of semiconductor products.

As The Asia Nikkei Review reports, the breakdown in relations was sparked by last year's decisions by the South Korean Supreme Court to award reparations to the country's wartime laborers at Japanese companies during Japanese occupation.

The court decisions challenged the understanding that all such claims were already settled "completely and finally" under a 1965 treaty that established diplomatic relations between the two countries. 

Tokyo is asking Seoul to abide by the 1965 agreement and has asked for third-party mediation, fearing that the court ruling would open the floodgates for other victims to seek compensation from these and other Japanese companies. Seoul has so far declined to submit to such mediation.

The decision comes after Japanese Foreign Minister Taro Kono and his South Korean counterpart Kang Kyung Wha met on the sidelines of annual ASEAN-related meetings in Bangkok, and clearly were unable to come to a compomise.

Japan's "White List" removal decision means that South Korea will be stripped of the privileged status that has allowed it to access Japanese goods without going through cumbersome processes. The decision is expected to take effect later this month.

Following the decision, all items except for food and lumber could potentially come under the scope of a Japanese government review when they are exported.  

The Korean Won is extending its losses against the dollar (and yen) following this news...

Japan's trade curbs have been met with an anti-Japan movement in South Korea, where shops and consumers have organized campaigns to boycott Japanese products and services, including trips to Japan; and Kang said she warned Kono that if Japan goes through with removing South Korea from the white list, Seoul would have no choice but to reconsider its security cooperation with Tokyo.

It would appear a second front has opened in the global trade war.