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S. Korea's 54-year trade deficit with Japan exposes heavy dependence Updated: 2019-07-11 10:06:45 KST

South Korea has traditionally enjoyed a large current account surplus with exports accounting for half of its GDP, but it has posted a trade deficit against Japan for more than five decades.
According to the Korea International Trade Association, Korea has recorded a total deficit of over 600 billion US dollars against Japan, since the two began bilateral trade in 1965 following the normalization of diplomatic ties.
In 1965, the trade deficit was at 130 million dollars which increased to around 20 billion in recent years, after hitting a record 36 billion in 2010.
Last year, trade deficit with Japan was tallied at 24 billion dollars, higher than Saudi Arabia, Qatar, Kuwait, which mainly export oil to South Korea.
High-tech products are the biggest source of the deficit against Japan, with semiconductors and chip-making equipment accounting for more than a third.
Chemical products and plastics topped two.five billion dollars in the first five months through May this year, which include photoresist and etching gas, items used to produce chips and displays that Japan imposed export restrictions on last week.

"Korean conglomerates have invested capital to diversify their final goods. Smaller firms invested in parts, but not as much in high-tech materials that require huge amounts of R&D and time. So, although Korean companies have become strong in semiconductors and smartphone products, they have relied heavily on high-tech materials imported from Japan and the U.S."

Seoul's key exports to Tokyo are mainly petrochemical goods, semiconductors and auto parts.
They totaled two.six billion dollars in the first five months of the year, but unlike fluorine polyimide, etching gas, and photoresist that Japan holds a dominant global market share in, those goods are relatively easy to source from countries other than Korea.
The South Korean government announced last week that it would invest 850 million dollars a year in semiconductors parts and materials.
But cooperation between conglomerates and smaller companies to invest and research in new materials and high-tech equipments is viewed to be more important in the long-run.
Kim Hyesung, Arirang News.
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