Corrected: UPDATE 2-Japan rebuffs Seoul's calls to scrap export curbs

STELLA CHEMIFA

10/07/2019 02:16

(Corrects quote in paragraph 14 to "7-8 months". The story was
subsequently updated without the quote.)
    * Japan could widen curbs, minister says
    * Moves could hit S.Korea producers
    * Seoul dispatched official to Washington
    * Move came weeks before Japan election

    By Takaya Yamaguchi and Hyunjoo Jin
    TOKYO/SEOUL, July 9 (Reuters) - Japan pushed back on Tuesday
against calls from South Korea to scrap curbs on some high-tech
exports, ratcheting up tension in a decades-old diplomatic
dispute that threatens to disrupt the global supply of memory
chips and smartphones.
    Tokyo said last week it would tighten restrictions on
exports of three materials used in smartphone displays and
chips, citing a dispute with Seoul over South Koreans forced to
work for Japanese firms during World War Two.
    The moves, which could hit tech giants Samsung Electronics
 005930.KS  and SK Hynix  000660.KS , among others, spotlight
Japan's sway over a vital part of the global supply chain that
the government is now using as a bargaining chip. 
    "Whether Japan implements additional measures depends on
South Korea's response," Industry Minister Hiroshige Seko told a
news conference after a cabinet meeting. 
    Tokyo was "not thinking at all" of withdrawing the curbs and
they did not violate World Trade Organization rules, he added.
    In Seoul, a government official said a South Korean foreign
ministry official was expected to discuss the curbs with his
counterpart in Washington. Its trade minister was also
considering travelling to the United States, a spokeswoman said.
    Seko's comments were an apparent response to South Korean
President Moon Jae-in, who urged on Monday that the restrictions
be withdrawn. Seoul could not rule out countermeasures for
damage inflicted on its firms, Moon added. 
    South Korea plans to complain to the WTO.  urn:newsml:reuters.com:*:nL4N2491GT
    The row shows no signs of abating, with Tokyo threatening
last week to drop Seoul from a "white list" of countries with
minimum trade restrictions, hitting supply of a wider range of
items used in weapons production.
    
    POTENTIAL TALKS
    Tokyo's halt to preferential treatment of the three
materials would force exporters to seek permission for each
individual shipment to South Korea, taking around 90 days.
    The dispute stems from Tokyo's frustration at what it calls
a lack of action by Seoul over a South Korean court ruling last
October that ordered Nippon Steel  5401.T  to compensate former
forced labourers.
    Japan says the issue of forced labour was fully settled in
1965 when the neighbours restored diplomatic ties.
    The curbs came just weeks before a July 21 upper house
election, where Prime Minister Shinzo Abe's Liberal Democratic
Party (LDP) and its junior partner are expected to win a solid
majority.
    "Japan is making a 100 percent legal argument but they
didn't show any sincerity over the past 7-8 months," said one
person familiar with the government's thinking, referring to the
years of disagreement over the dispute. 
    "Unfortunately, the election is coming... The LDP will do
anything to solidify their support base."
    Officials of both countries plan to hold talks in Japan on
the curbs as early as this week, the Yomiuri newspaper said on
Tuesday. 
    Japanese working-level officials would respond to South
Korea's request for an explanation of the curbs, chief cabinet
secretary Yoshihide Suga said, adding that the schedule was
being arranged.
    The neighbours share a bitter history dating to Japan's
colonisation of the Korean peninsula from 1910 to 1945, which
saw forced use of labour by Japanese companies and the use of
comfort women, a euphemism for girls and women, many of them
Korean, forced to work in its wartime brothels.

 (Reporting by Takaya Yamaguchi, Kaori Kaneko, Chris Gallagher
in TOKYO and Hyunjoo Jin and Hyonhee Shin in SEOUL; Writing by
Chris Gallagher and David Dolan; Editing by Clarence Fernandez)
 ((chris.gallagher@thomsonreuters.com; https://twitter.com/ChrisGallagher4;
 81-3-6441-1842; Reuters Messaging:
chris.gallagher.thomsonreuters.com@reuters.net))