Pulling Back
Economic dependence between Korea and Japan has been rapidly decreasing after Shinzo Abe took office as Japan's seventh prime minister in 2012.
According to a report called the “Recent Changes in Trade Investment Pattern Between Korea and Japan and its Implications” released by the Korea Economic Research Institute (KERI) on Aug. 24, Japan’s direct investment in Korea, number of tourists, and trade volume declined remarkably in the past three years.
First of all, Japan accounts for 13.1 percent of the total foreign investment in Korea in 2014, a 14.8 percent point decrease in two years from 27.9 percent in 2012.
Its amount had also gradually dropped from US$4.54 billion (5.46 trillion won) in 2012, US$2.69 billion (3.23 trillion won) in 2013, to US$2.49 billion (2.99 trillion won) in 2014.
Choi Nam-suk, a research fellow at KERI, said, “Despite the prolonged recession, Japan’s direct investment in Korea had remained at the 16 percent to 29 percent levels. After Shinzo Abe took office as Japan's prime minister in 2012, turning to the right side, it strained the Korea-Japan relations and led to the decrease in investment.”
Also, Korea’s trade with Japan has been posting negative growth since 2012.
Exports to Japan surged as much as 40.8 percent in 2011 from the same period a year ago, while the figure dropped 2.2 percent in 2012. Then, it kept decreasing from 10.7 percent in 2013 to 7.2 percent in 2014 and 17.6 percent in the second quarter of 2015.
Imports from Japan have also started slowing down after 2012. The figure increased 6.3 percent in 2011 from a year earlier, but it fell 5.8 percent in 2012.
Although the trade volume between Korea and Japan has expanded since 2012, Japan has a markedly lower share of Korea’s foreign trade. After the two countries signed a trade agreement in 1965, Japan accounted for 37 percent of the total trade in 1970, reaching its peak. The figure has continued to decline since then, to 7.6 percent in the second quarter this year.
Meanwhile, the number of Japanese visiting Korea dropped by a third, from 3.42 million in 2012 to 2.17 million in 2014. Also, Japanese tourists accounted for 19.9 percent of the total number of foreign tourists in 2014, down by half from 39.5 percent in 2012.