Japan allows further exports of high-tech material to SK market

Japan has approved shipments of a high-tech material to South Korean (SK) market for the second time since imposing export curbs last month, two sources said, ahead of talks by government officials this week to resolve a dispute stemming from their wartime past.

Relations between the two US allies worsened late last year when a South Korean court ordered Japanese companies to compensate some of their former labourers forced by the firms to work during World War Two.

In early July, Japan tightened controls on shipments to South Korea of three materials used in chips and displays, threatening to disrupt the global tech supply chain. Japan also announced a plan to remove South Korea’s fast-track export status from later this month.

The material cleared for Japan’s exports to Samsung Electronics in South Korea is photoresists, which are crucial for the tech giant’s advanced contract chipmaking production, the people who were familiar with the matter said on Tuesday.

Meanwhile, Japan’s Nikkei rose for a third straight day on Tuesday as investors tiptoed back into equities amid signs of a slight easing of trade tensions between the United States and China. Besides, Japan-Korea trade dispute easing also boosted positive sentiments in the Tokyo Stock market. Hopes for fresh stimulus moves by major economies also boosted riskier assets.

On Monday, Washington extended a reprieve that permits China’s Huawei Technologies to buy components from US companies by 90 days, to supply existing customers.

The Nikkei share average rose 0.6% to 20,677.22 points, while the broader Topix added 0.8% to 1,506.77.

“It’s like an extension of yesterday’s rally —largely buoyed by short-covering although the moves seemed to lack strong conviction,” said a Tokyo-based investment manager.

A Samsung Electronics spokeswoman and a South Korean trade ministry spokeswoman declined to comment. A Japanese official in charge of the issue was not available for comment.

An official at South Korea’s presidential office confirmed the exports at a briefing, but said that “uncertainties” will remain until Japan completely removes the tighter export controls it has instituted.

“Tokyo’s latest export approval is positive for the local industry, but I don’t see Japan’s move as a conciliatory message to South Korea,” another South Korean government official told Reuters, requesting anonymity because of the sensitivity of the matter.

Earlier this month, Japan gave the green light to the export of photoresists to Samsung Electronics for the first time since it imposed the restrictions.

Samsung Electronics shares ended up 1.95% on Tuesday, leading the wider market’s gain of 1.05%.

Japan’s latest move comes ahead a meeting between Japanese Foreign Minister Taro Kono and his South Korean counterpart, Kang Kyung-wha, in Beijing on Wednesday.

“This is a signal that Japan would not further escalate tensions. This is positive in that it creates an atmosphere for talks,” said Ahn Duk-geun, a international studies professor at Seoul National University.

But he said he does not expect a breakthrough in the stalemate, citing wide differences over how to resolve forced labour issue between the two neighbouring countries. “I hope there will at least be a handshake,” Ahn said.

“We will have to actively express our position, but it is a very difficult (situation),” Kang said at an airport in Seoul on Tuesday before leaving for Beijing.

Separately, South Korean President Moon Jae-in pledged to nurture the local carbon fiber industry, as part of efforts to reduce dependence on Japan imports for high-tech materials.

Moon attended an event by South Korean firm Hyosung Advanced Materials to announce a total of 1 trillion won ($828.55 million) investment by 2028 in expanding production of carbon fiber, one of the items potentially subject to tighter export controls and used to make parts of hydrogen cars and aircrafts.

Currently, South Korean firms rely on Japan’s Toray Industries and others for carbon fiber supplies, industry officials say.

Investors were growing cautious ahead of the US Federal Reserve’s Jackson Hole symposium and G7 (Group of Seven) summit later in the week, he said.

On Wall Street, all three major stock indexes gained overnight, with Apple jumping 1.9% to provide the biggest boost to the Nasdaq.

That helped Tokyo-listed Apple suppliers, with Taiyo Yuden and TDK Corporation rising 1.6% and Foster Electric advancing 1.4%.

After speaking with Apple’s chief executive Tim Cook on Sunday, US President Donald Trump said the CEO “made a good case” that tariffs could hurt Apple, given that Samsung’s products would not be subject to those same tariffs.

Reuters