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Japan-South Korea rift

South Korea threatens retaliation over Japan export controls

Companies brace as Tokyo eyes sweeping curbs beyond chipmaking materials

TOKYO -- South Korea is gearing up to fight Japanese export restrictions that kicked in Thursday on chipmaking materials, with the possibility that trade frictions over wartime labor will spill across industry lines.

Japan is also looking to remove South Korea in late August from a "whitelist" of countries that enjoy preferential treatment on trade. Businesses on both sides of the water worry how far the impact could spread.

South Korea will consider "various corresponding measures" unless Japan withdraws export controls, Economy and Finance Minister Hong Nam-ki said in a radio interview Thursday.

Hong raised the possibility of going to the World Trade Organization but said this "cannot be the only action."

Tensions are only expected to grow as Japan prepares to take South Korea off a 27-country whitelist on trade. This would enable the Ministry of Economy, Trade and Industry here to require case-by-case approval for any exports to South Korea, not just the three materials in Thursday's restrictions.

South Korea would be the first country to be removed from the list, which it joined in 2004.

Japan exports a wide variety of products to South Korea, including chemicals, electronic parts and machine tools. It is expected to take about 90 days for companies to obtain necessary approvals for any products that METI requires advance screening for on national security grounds.

Concern is growing in South Korea that Japan could impose export restrictions in other industries. The Maeil Business Newspaper reported Thursday that automobiles, one of South Korea's most important sectors, could be next.

Japanese companies are big producers of components used in electric- and hybrid-car batteries. Asahi Kasei and Mitsubishi Chemical Holdings unit Mitsubishi Chemical are among the world's leading players in separators and battery electrolytes, respectively.

Supply disruptions in these materials would impact Hyundai Motor's push on environmentally friendly vehicles, as well as earnings at such battery makers as LG Chem and Samsung SDI, Maeil reported.

Japanese businesses are growing worried as well. "We could be subjected to export controls, too," an executive at a machine tool manufacturer said.

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