Naver and Kakao are facing the growing possibility of falling victim to trade tensions between Seoul and Tokyo at a time when the two IT giants are expanding aggressively in Japan, industry experts said.

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The export restrictions imposed by Japan amid a deepening diplomatic row between the two nations. The focus is on the semiconductor and display sectors, thus there would be no immediate impact on the IT firms.

But if bilateral relations deteriorate further, additional regulations by the Japanese government could be added or an anti-Korea consumer boycott in Japan could occur. Industry experts noted this could hurt Korea’s economy as a whole.

“The possibility for the Korea-Japan trade conflict to exert an influence on Naver and Kakao’s businesses in Japan cannot be ruled out,” said Yoo Byung-joon, a professor of business administration at Seoul National University.

Naver, Korea’s largest portal operator, has been going all out to target the mobile payment service market in Japan through its Japanese subsidiary Line in tandem with Tokyo’s policy to move toward a cashless society. Line is the Japan-based mobile messenger operator owned by Naver.

Based on the huge influence of its mobile messenger service in Japan, Line, which launched its mobile payment service Line Pay in 2014, has carried out aggressive marketing to be a frontrunner in the market, in which it has to compete with large Japanese companies such as Rakuten and NTT Docomo as well as global tech giants Apple and Google.

Kakao, the nation’s dominant messaging app operator, has also been betting big on webtoons in the Japanese market through its Japanese subsidiary Kakao Japan.

The company has also focused its efforts on expanding its character business in Japan through its character licensing arm Kakao IX, formerly known as Kakao Friends. Since making inroads into the Japanese market in December,2018, the company has opened two stores in Tokyo and one in Osaka.

But experts cited Korean consumers’ moves to boycott popular Japanese brands such as Nikon, SONY and Uniqlo amid growing anti-Japan sentiment, noting that the same thing could happen in Japan to Korean brands.

“There is a possibility that Japanese consumers could boycott Korean brands and products as well. Companies will need to review any possibilities and come up with countermeasures,” Yoo said.

Regarding the issue, a Naver official said, “We are not worried about the ongoing situation as the issues are centered on the manufacturing business.”

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A Kakao official also said, “There has been no impact on our business so far.”

 

Original Source