Tokyo should stop pressuring Naver to sell stake in Line
The Yoon Suk Yeol administration has signaled its support for Naver, the nation’s No. 1 online portal operator, in addressing pressure from Tokyo to divest stakes in Line, Japan’s largest instant messaging app. On Tuesday, the presidential office, along with the foreign affairs and ICT ministries, vowed to adopt collaborative approaches to support Naver, while fully respecting its position. We welcome this initiative as a commitment o safeguard the interests of domestic enterprises against external pressure.
Earlier, Japan’s Ministry of Internal Affairs and Communications asked LY Corp., Naver’s Tokyo-based operator, to reconsider its capital relations with Naver, in the wake of a data leak in November through Naver’s cloud server in Korea. LY Corp., Line’s operator, is a consortium between Naver and Softbank. What is even more concerning is that the Japanese government recently requested the state-run Personal Information Protection Committee (PIPC) to conduct additional investigations into the hacking case. However, according to a report in the vernacular Chosun Ilbo on Thursday, the Korean government declined to accept the request, stating that the breach of personal data had negligible consequences.
Prompted by the Japanese ministry’s guidelines, Softbank has been gearing up to acquire part of Naver’s 50 percent stake in A Holdings, a joint venture that owns 64.5 percent of LY Corp. Pressure from Japan, aimed at enabling Softbank to snatch managerial rights over the app from Naver, has triggered contentious debate over corporate governance and data security.
LY Corp. acknowledged that approximately 440,000 pieces of personal information were leaked due to hacking attacks on the server. Yet it also noted that there was only a limited impact on users. Japan’s “improper” intervention in the case persisted despite the firm’s acknowledgment, raising fresh concerns over Naver’s management dynamics and broader implications for bilateral economic relations.
Against this backdrop, it is unreasonable for the Japanese government to escalate pressure on Naver to divest its holdings. This violates the Korea-Japan trade agreement that took effect in 2003, which guarantees the most favored treatment for investing enterprises between the two countries. Japan’s attempt to convert Line, now with 96 million users, into a Japanese firm reflects a clear interference in the corporate management of a private enterprise, prompting criticism for a blatant anti-market approach.
The Korean government must play a more assertive role in dissuading Japan from escalating pressure. Japan’s framing of Naver’s stakeholding as a diplomatic issue will only risk distancing Seoul and deepening distrust between the two nations.
In parallel with international precedents, the U.S. Congress passed a bill mandating the sale of China’s app TikTok, highlighting the complexities of balancing national interests with global market dynamics. This action was taken to contain the potential exploitation of information by an adversarial state, namely China. Seoul and Tokyo, however, are not adversarial states. They are friendly and cooperative neighbors, sharing a history of collaboration and mutual benefit.
Japan’s concerns about potential foreign domination of their people’s data are understandable, although this practice is common in global markets. However, a market-oriented democratic government should refrain from violating the property rights of foreign companies.
The Yoon administration has been eager to improve soured relations with Japan that deteriorated during the previous Moon Jae-in administration. Regarding the knotty issue of Korean workers forcibly mobilized during World War II, the Yoon administration suggested a device for a third party to compensate the victims. Chilled bilateral relations have shown remarkable improvement evidenced by the resumption of shuttle diplomacy between the heads of state.
Regrettably, however, the Japanese government’s move is feared to dampen bilateral relations, by asking Naver to abandon its stake in LY Corp. It is like treating Korea as an enemy state. Japan should take full responsibility for any potential backlash resulting from its seemingly inappropriate actions. We urge Japan to cease making reckless demands, and we encourage the Korean government to pursue nuanced and prudent diplomatic approaches to resolve this impasse.
