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South Korea cancels Japan intelligence deal amid trade dispute

South Korea said it is cancelling an intelligence-sharing pact with Japan amid a bitter trade dispute, a surprise announcement that signals the lowest point in relations since the two countries established diplomatic ties in 1965.

The cancellation signals the lowest point in relations between the 2 countries in over 50 years

Relations between Japan and South Korea are at their lowest point since the two established diplomatic ties in 1965, as South Korea drops an intelligence-sharing pact with Japan amid a bitter trade war. (Eugene Hoshiko/The Associated Press)

South Korea said Thursday it is cancelling an intelligence-sharing pact with Japan amid a bitter trade dispute, a surprise announcement  likely to set back U.S. efforts to bolster mutual security co-operation with two of its most important allies in the Asian region.

The South Korean decision will also further aggravate its ties with Japan that are already at their lowest point since the two countries established diplomatic ties in 1965. Japan colonized the Korean Peninsula from 1910 to 1945.

Many experts had predicted South Korea would be unlikely to spike the three-year-old intelligence-sharing deal for the sake of its relations with the United States. South Korea has been seeking U.S. help in resolving the trade dispute, and Seoul and Washington have also been working together to restart stalled talks on stripping North Korea of its nuclear weapons.

South Korea's presidential office said it decided to terminate the intelligence deal because Japan's recent decision to downgrade South Korea's trade status caused a "grave" change in security co-operation between the countries.

He said South Korea will formally notify Japan of its decision before Saturday, the deadline for an extension of the pact for another year

In response, Japanese Foreign Minister Taro Kono said Japan summoned the South Korean ambassador on Thursday to protest Seoul's decision. He said South Korea is misreading the security environment.

South Korea's Defence Ministry also said in a statement Thursday that it will try to maintain a "stable and perfect combined security posture" with the United States regardless of the termination of the intelligence deal. It called the South Korean-U.S. alliance "powerful."

"Under this situation, the government has determined that maintaining the agreement, which was signed for the purpose of exchanging sensitive military intelligence on security, does not serve our national interests," Kim You-geun, deputy director of South Korea's presidential national security office, said in a nationally televised statement.

Japan's Kyodo News agency quoted an unidentified Japanese government official as saying the South Korean decision was "extremely regrettable." Public broadcaster NHK said an unidentified official described the decision as "unbelievable," while another official said it was unlikely to have much impact on Japanese security.

Bitter trade dispute

In recent weeks, Japan has imposed stricter controls on exports to South Korea of three chemicals essential for manufacturing semiconductors and display screens — key export items for South Korea — and decided to remove South Korea from a list of countries granted preferential trade status.

South Korea accuses Japan of weaponizing trade to punish it over a separate dispute linked to Japan's brutal colonial rule of the Korean Peninsula. Japan denies that, saying its steps were taken because of unspecified security concerns.

Japan's Prime Minister Shinzo Abe, about to deliver a speech on August 15 to mark the anniversary of Japan's World War II surrender, suggested without evidence that materials exported to South Korea ended up in North Korea. (Tomohiro Ohsumi/Getty Images)

South Korean government and ruling party officials have publicly questioned how Seoul could share intelligence with a country that questioned Seoul's handling of sensitive materials imported from Japan.

Without providing concrete evidence, some Japanese officials including Prime Minister Shinzo Abe have suggested some critical Japanese materials with potential military applications exported to South Korea may have reached North Korea. Seoul flatly denies that.

The Japanese trade curbs triggered an outburst of anti-Japan sentiment in South Korea. Many South Korean citizens rallied in the streets, cancelled planned holiday trips to Japan and launched widespread boycotts of Japanese beer, clothes and other products.

The South Korean government, for its part, decided to downgrade Japan's trade status.