Japan and South Korea fight over app amid tense times

A joint venture set up in 2019 by two top Japanese and South Korean companies was seen as an example of cooperation at a time when diplomatic relations were tense.

Executives from South Korea’s Naver and Japan’s SoftBank Group said they would jointly own the operator of Line, a South Korean-developed messaging app popular in Japan. They gave the project a codename that emphasized collaboration: Gaia.

Five years later, Japan and South Korea have made significant progress in easing long-standing historical tensions. But disagreement has emerged over ownership of the Naver-SoftBank project, and diplomats and international relations experts fear it could once again strain ties between the countries.

Japan and South Korea, both key allies of the United States in Asia, have a troubled history. Japan colonized Korea from 1910 until Japan’s surrender in World War II in 1945, and Japan and South Korea have often clashed over territory and geopolitical disagreements.

“As we have seen many times in the past, relations between Japan and Korea are changing and smaller points of tension – whether wartime or modern – can quickly escalate and impact broader defense and diplomacy,” said Maiko Takeuchi , regional director at CCSI, a New York-based group that advises governments on international security issues.

The stakes have been raised amid concerns about North Korean nuclear proliferation and increased instability in the region, Ms. Takeuchi said. “There is a strong sense from the United States and elsewhere that maintaining good relations between Japan and Korea is more important than ever,” she said.

The messaging platform at the center of the dispute, Line, was launched in Japan in 2011 by Naver, the operator of South Korea’s main search engine. After the Tohoku earthquake and tsunami that year disrupted phone lines across Japan, Line allowed users to communicate over an internet connection.

Since then, Line, known for its screen stickers featuring expressive rabbits and bears, has become Japan’s most popular messaging app. It has amassed hundreds of millions of users and expanded to Thailand, Taiwan and Indonesia.

In 2019, SoftBank founder Masayoshi Son and Naver co-founder Hae-Jin Lee agreed to set up a 50-50 joint venture that would indirectly operate Line. Reports dubbed the deal the “Son-Lee alliance,” at a time when Japanese-South Korean relations were at an all-time low.

The year before, South Korea’s Supreme Court had ordered several Japanese companies to compensate South Koreans forced to work in their factories during World War II. Japan responded to the court order in 2019 by imposing export restrictions on chemicals essential to South Korea’s semiconductor industry.

The countries’ top leaders remained silent and there was talk of breaking intelligence-sharing agreements. This was a major problem for the United States, which had been trying to get Japan and South Korea to work together to meet challenges from China and North Korea.

But relations between South Korea and Japan improved dramatically afterward. In March 2023, South Korea’s President Yoon Suk Yeol announced a plan to compensate former forced laborers with money from a government-run fund. Later that month, Mr. Yoon met Japanese Prime Minister Fumio Kishida one-on-one — their first in 12 years — and Japan lifted restrictions on semiconductor exports.

But late last year, cracks began to appear in the Naver-Softbank venture.

Line’s operator, a company called LY Corporation, said in November that a third party had gained unauthorized access to its systems via Naver’s cloud storage system. In turn, Japan’s Communications Ministry issued an ambiguous statement that was widely interpreted as a directive to Naver to sell its stake in its joint venture.

The measure caused a stir in South Korea. Some analysts and politicians interpreted it as an attempt by Japan to apply political pressure to undermine Naver, one of South Korea’s largest companies. Naver’s union said it was against any sale, and company CEO Choi Soo-Yeon said she found the Japanese government’s directive “very unusual.”

A editorial Last month, the Korea Economic Daily equated the move to state intervention. “For the Japanese government to now demand that Naver leave, after all the hard work and investment, seems to go against the principles of a civilized nation,” the article said.

In South Korea, opposition parties have criticized Mr. Yoon for taking what they see as overly conciliatory stances toward Japan, calling Naver the latest victim of that policy. Cho Kuk, a key ally of South Korea’s former president, has called Mr. Yoon’s approach to Japan “demeaning” and accused the president of failing to support a successful domestic company.

In a briefing in May, Mr. Yoon’s policy chief of staff, Sung Tae-yoon, said that as long as Line’s operator was able to draw up satisfactory plans to strengthen security, the Japanese government should not take “adverse measures” that would force a sale of the Naver stake. The South Korean government will “continue to ensure that Korean companies are not subjected to discriminatory measures or unfair treatment abroad,” he said.

According to the companies, SoftBank and Naver are discussing possible changes to the ownership structure of Line’s operator.

Naver executives have remained largely silent on the issue. A Naver spokeswoman said the company was open to all options. A spokesperson for Japan’s Communications Ministry said it was up to Line’s operator to decide how to improve safety management.

Leaders on both the Japanese and South Korean sides appear determined to prevent the row over Line from escalating. Mr Kishida and Mr Yoon agreed in late May that the dispute would not be allowed to hamper diplomatic relations.

In the past, even seemingly minor incidents have proven capable of turning into long-lasting diplomatic conflicts. In 2018, when a South Korean navy ship was accused of aiming its fire control radar at a Japanese aircraft flying over the Sea of ​​Japan, the countries responded by halting defense exchanges. Only this month was that impasse broken.

How Japan ultimately handles the issue of Line’s ownership could affect the broader course of Japan-Korea relations, said Yul Sohn, president of the East Asia Institute, a Seoul-based think tank.

“On the Korean side, the general public believes that the Yoon government has shown its intentions and the cup is still half empty and waiting for Japan’s response,” he said.

If Japan shows willingness to reciprocate, even with a gesture such as a concession in the Line dispute, Mr Yoon could use that to achieve further cooperation, Mr Sohn said.

“We are in a phase of rebuilding relationships, but both parties are very aware of what happened in the past,” he said. “Even with a stronger foundation, there are still cracks that need to be addressed.”

John Yoon contributed to the reporting from Seoul.