Abe unlikely to meet Moon in September

TOKYO - Japanese Prime Minister Shinzo Abe is unlikely to meet South Korean President Moon Jae-in during the UN General Assembly in September, the Sankei newspaper reported, the latest sign of frosty relations between the key allies of the United States in Northeast Asia.

Abe will not hold talks with Moon unless Seoul takes "constructive steps" over World War-II era forced labor and other issues, the Japanese daily reported on Monday.

Abe will also forgo meeting Moon at other meetings, including those of the Association of Southeast Asian Nations meeting in October and the Asia-Pacific Economic Cooperation gathering in November, the Sankei reported.

Relations between the two neighbors are arguably at their lowest since the countries normalized ties in 1965 as they spar over compensation for wartime forced laborers and recent export curbs imposed by Tokyo.

Japan tightened restrictions on exports to South Korea of important high-tech materials used for making memory chips and display panels, citing what it has called inadequate management of sensitive items by its Asian neighbor.

The curbs were seen as a response to South Korean court rulings ordering Japanese companies to compensate wartime forced laborers.

Japan says the decision violated international law because the issue of compensation was settled under the 1965 treaty that established diplomatic relations between the two nations after World War II.

"Things might be at their worst since the normalization of diplomatic relations," the Sankei quoted a source close to Abe as saying.

Abe and Moon also did not meet on the sidelines of the G20 leaders' summit in Osaka, Japan, in June.

Adding to the export curbs, Japan is preparing for Cabinet approval as early as Aug 2 to remove South Korea from a so-called white list status with minimum trade restrictions, Japanese media have reported.

But Japanese Chief Cabinet Secretary Yoshihide Suga has not confirmed reports the Cabinet will approve the plan as early as Aug 2. If it does, the new rules would take effect on Aug 23, forcing exporters to get licenses to sell a huge array of products ranging from alloys of aluminum to freeze dryers and vacuum pumps.

Approvals of such exports could take up to 90 days, slowing but not halting shipments. But ending South Korea's "white country" status would also mean Japan could limit exports of any product on national security grounds.

The tighter approvals on the three items newly subject to licensing controls - fluorinated polyamides, photo resists and hydrogen fluoride - have had a limited impact, analysts say, because South Korean companies had at least three-month stockpiles of the computer chips and displays that would be affected, thanks to slowing demand and worries over trade tensions between the US and China.

But the tightening controls are adding to uncertainty for technology manufacturers: According to IHS Markit, in 2018 Korean firms SK Hynix and Samsung Electronics supplied 61 percent of memory components used in various electronics, relying heavily on Japanese suppliers.

"If restrictions remain, Korean chipmakers' production lines and therefore global semiconductor supply chains are likely to be disrupted. Korean chipmakers are major actors in global semiconductor supply chains," Fitch Ratings said in a report.

Seoul has protested against the plan, saying it would undermine their decades-old economic and security cooperation and threaten free trade.

"If the Japanese government decides to remove South Korea from its 'white list', this could substantially increase the negative impact of trade frictions with Japan on the South Korean economy," Rajiv Biswas, chief economist for at IHS Markit, said in a commentary.

Agencies