Japan’s pressure on Naver

Tokyo’s unprecedented pressure on Naver over Line data leak threatens bilateral ties

The Japanese government is stepping up pressure on South Korean portal giant Naver to sell off its stake in a joint venture that runs Line, the dominant messaging app in Japan, citing a data leak — a controversial move that has sparked a wave of critical responses in Korea and is likely to complicate already complex bilateral ties between the two nations.

Japan’s Ministry of Internal Affairs and Communications has issued administrative guidance twice — on March 5 and April 16 — in what is widely deemed as “unprecedented steps” directing Tokyo-based LY Corp. to lower its dependency on Naver following the data leak.

Naver and SoftBank, led by Masayoshi Son, formed a joint venture named A Holdings, each with 50 percent of shares, in 2021, a deal that marked the Korean portal’s fullfledged expansion into its global platform business. A Holdings controls a 64.4 percent stake in LY Corp., which operates Line, the most popular messaging app in Japan.

The Japanese government’s forceful administrative moves came after LY Corp. revealed a personal data leakage of Line users involving Naver Cloud’s system in November. Encouraged by the Japanese government’s push, SoftBank is currently calling on Naver to divest from A Holdings.

Experts as well as media outlets in Seoul expressed concern about the possibility that Naver’s global messenger platform and related technological know-how might be unfairly taken away by a Japanese company amid growing cybersecurity disputes worldwide.

The dispute is now spreading from the business sector into the diplomatic field. In response to the Japanese government’s administrative guidance over the two companies in Korea and Japan, the Ministry of Foreign Affairs in Seoul announced Saturday that it holds a “firm position that there should be no discrimination against Korean companies.” The Foreign Ministry also said it will check the position of Naver and contact the Japanese counterpart if necessary.

It is deeply regrettable that Tokyo is going overboard regarding the stake sell-off involving Naver and SoftBank. It is common for private companies to compete with each other to take a controlling stake in a joint venture. However, it is unusual for a government to step in for such dealmaking that involves the management of a private firm. In addition, Japan’s meddlesome step could be seen as a violation of the Bilateral Investment Treaty between the two countries.

More important are the ominous signs that Tokyo’s perspective on cybersecurity is negatively shifting in connection with Seoul. Japan’s move over the data leakage of Line users suggests that it is now viewing Korea as a potential enemy state that it believes could exploit the leaked data of Japanese people. This view squarely contradicts the basic relations between Seoul and Tokyo. Even though the two countries are squabbling over a host of conflicting issues, Korea and Japan maintain largely cooperative relations as partners together with the US in various fields, including global supply chains and regional security.

The Japanese government’s view that Korea is a threat to its cybersecurity and its willingness to twist a Korean company’s arm to give up on its investments and assets in Japan are nothing if not provocative acts that throw cold water on the relations between Korea and Japan.

The controversy over Naver and SoftBank comes at a time when the US government has moved to force the sale of TikTok by its Chinese owner ByteDance, citing national security concerns. The US cites TikTok’s Chinese ties as grounds for risks that the Chinese government could access the sensitive data of TikTok’s 170 million US users. The US and China have been driving out each other’s social media as part of aggressive cybersecurity measures targeting cyber foes in recent years.

It is hoped that Tokyo will not overstep its authority in the NaverSoftBank dispute beyond international norms, thereby worsening its ties with Seoul to the confrontational level seen between the US and China.