Following Tuesday's ruling that compensation be paid to former requisitioned workers from South Korea, Japanese companies that are facing similar damage suits, such as Nippon Steel & Sumitomo Metal Corp. and Mitsubishi Heavy Industries, Ltd., and those now active in South Korea, are closely watching how the Japanese and South Korean governments will respond.
South Korea is the third-largest trade partner for Japan, following China and the United States. Japan-South Korean economic relations may temporarily cool down, because, for example, Japanese companies may refrain from entering markets and making new investments in South Korea.
In response to the ruling, a joint statement was released on Tuesday by four organizations -- The Japan Business Federation (Keidanren), The Japan Chamber of Commerce and Industry, the Japan Association of Corporate Executives (Keizai Doyukai) and the Japan-Korea Economic Association -- saying: "[The ruling] could hamper the promotion of investment and business in South Korea in the future. It could also shake the good economic relations between the two countries."
Nippon Steel released a comment stating, "From now on, we will properly deal with [the ruling] by closely examining the ruling's content and also based on how the government responds." Mitsubishi Heavy Industries likewise said that if the company was ordered to pay compensation in lawsuits it is facing, it will "properly deal with [such rulings] in line with the government's positions."
Tuesday's ruling is different from the comfort women issue and the issue concerning the Takeshima islands because it can directly influence Japanese companies, such as ordering payment of compensation and seizing a company's assets. Moreover, it includes many unclear factors, such as what concrete measures will be taken by the South Korean side if a company refuses to pay.
According to the South Korean Trade, Industry and Energy Ministry and other sources, about 3,100 Japanese companies had local affiliates and branches in South Korea as of October. Japanese companies' direct investment in South Korea amounted to 1.84 billion dollars (about 206 billion yen) last year.
Japanese and South Korean companies have so far distanced themselves from history and political issues, emphasizing gaining economic benefits from each other.
A Seoul-based Japanese corporate source said, "Even when Japan-South Korean relations cooled down, it didn't affect corporate activities very much."
However, a source related to a Japanese bank that has a branch in Seoul expressed concern that the ruling "may once again throw cold water on enthusiasm for investment in South Korea, which shows signs of recovering from the adverse effects of military provocations by North Korea."
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