In 2019, a joint venture between two top companies from Japan and South Korea symbolized a beacon of cooperation amidst strained diplomatic relations. Executives from South Korea’s Naver and Japan’s SoftBank Group agreed to jointly own the operator of Line, a messaging app developed in South Korea and popular in Japan. The project was aptly codenamed “Gaia,” emphasizing collaboration and unity.
Five years later, significant strides have been made in easing the long-standing historical tensions between Japan and South Korea. However, a rift has emerged over the ownership of the Naver-SoftBank venture, raising concerns among diplomats and international relations experts about the potential stress it could place on the countries’ ties.
Japan and South Korea, both key United States allies in Asia, share a sensitive history. Japan colonized Korea from 1910 until Japan’s surrender in World War II in 1945. Since then, the two nations have often clashed over territory and geopolitical issues. “As we’ve seen many times in the past, relations between Japan and Korea shift, and smaller points of tension – whether they be wartime or modern – can quickly escalate to impact defense and diplomacy more broadly,” said Maiko Takeuchi, regional managing director at CCSI, a New York-based group advising governments on international security issues.
The stakes are high, given concerns about North Korean nuclear proliferation and heightened regional instability. “There is a strong view from the US and elsewhere that preserving Japan and Korea’s good relations is more important than ever,” Takeuchi added.
The messaging platform at the center of this dispute, Line, was introduced in Japan in 2011 by Naver, South Korea’s leading search engine operator. During the Tohoku earthquake and tsunami that year, Line enabled users to communicate via an Internet connection when phone lines were disrupted. Line, known for its expressive stickers featuring rabbits and bears, quickly became Japan’s most popular messaging app, amassing hundreds of millions of users and expanding into Thailand, Taiwan, and Indonesia.
In 2019, SoftBank founder Masayoshi Son and Naver co-founder Hae-Jin Lee agreed to create a 50-50 joint venture to indirectly operate Line. This “Son-Lee alliance” came at a time when Japanese-South Korean relations were at a historic low. The previous year, 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 reacted by imposing export restrictions on chemicals essential to South Korea’s semiconductor industry.
Key Events in Japanese-South Korean Relations (2018-2023)
| Year | Event |
|---|---|
| 2018 | South Korea’s Supreme Court orders Japanese companies to compensate forced laborers. |
| 2019 | Japan imposes export restrictions on South Korea; Naver and SoftBank form a joint venture for Line. |
| 2023 | South Korean President Yoon announces compensation plan for forced laborers; Yoon and Japanese PM Kishida hold first bilateral meeting in 12 years. |
| 2023 | Japan lifts semiconductor material export restrictions. |
Despite improved relations, cracks began to appear in the Naver-SoftBank venture late last year. LY Corp, the operator of Line, revealed in November that a third party had gained unauthorized access to its systems via Naver’s cloud storage system. In response, Japan’s communications ministry issued a statement widely interpreted as a directive for Naver to reduce its stake in the joint venture.
This move stirred controversy in South Korea. Analysts and politicians saw it as Japan exerting political pressure to undermine Naver, a major South Korean company. Naver’s union opposed any sale, and CEO Choi Soo-Yeon found the Japanese government’s directive “highly unusual.”
A Korea Economic Daily editorial criticized the directive as state interference. “For the Japanese government to now demand Naver’s exit, after all the hard work and investment, seems at odds with the principles of a civilized nation,” the article stated. In South Korea, opposition parties have criticized President Yoon for what they perceive as overly conciliatory positions towards Japan, citing Naver as the latest victim of these policies. Cho Kuk, a key ally of South Korea’s former president, called Yoon’s approach to Japan “humiliating,” accusing the president of failing to support a successful domestic firm.
In a May briefing, Yoon’s policy chief of staff, Sung Tae-yoon, stated that as long as Line’s operator could lay out satisfactory plans to strengthen security, the Japanese government should not proceed with measures forcing Naver to sell its stake. South Korea’s government will “continue to ensure that Korean companies are not subjected to any discriminatory measures or unfair treatment overseas,” he said.
- LY Corp reported unauthorized access to its systems via Naver’s cloud storage.
- Japan’s communications ministry issued a statement seen as a directive for Naver to reduce its stake.
- Naver’s union and CEO oppose the sale, calling it “highly unusual.”
- South Korean opposition criticizes President Yoon for being overly conciliatory towards Japan.
- South Korea’s government pledges to protect Korean companies from unfair treatment.
SoftBank and Naver are discussing possible revisions to the ownership structure of Line’s operator. Naver executives have largely remained quiet on the topic, with a spokesperson stating the company is open to all possibilities. A spokesperson for Japan’s communications ministry said it was up to Line’s operator to decide how to improve its security governance.
Leaders on both the Japanese and South Korean sides are determined to prevent the quarrel over Line from escalating. Kishida and Yoon agreed in late May that the dispute should not hinder diplomatic relations. However, historical tensions have shown that even minor incidents can escalate into prolonged diplomatic conflicts. In 2018, for instance, a South Korean naval ship was accused of aiming its fire-control radar at a Japanese aircraft over the Sea of Japan, leading to halted defense-related exchanges. The deadlock only eased this month.
How Japan handles the issue of Line’s ownership may influence the trajectory of Japanese-Korean relations. Yul Sohn, president of the East Asia Institute, a Seoul-based think tank, noted, “From 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 to respond.”
If Japan demonstrates a willingness to reciprocate, even through a gesture such as a concession related to the Line dispute, Yoon could leverage that to further cooperation, Sohn suggested. “We are in a phase of recovering relations, but both parties are highly aware of what has happened in the past,” he said. “Even with a stronger foundation built, there are still cracks that need to be reckoned with.”
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