President Moon condemned Japan for linking history with economy. He warned of consequences for the Japanese economy; however, he also left the door open for diplomacy. On July 18, President Moon held a meeting with five political party leaders to discuss Korea-Japan relations. He also agreed to establish an emergency cooperation agency. Director of National Security, Chung Eui-yong, hinted the possibility of reconsidering GSOMIA should Japan implement export controls. GSOMIA is an annually renewed military intelligence sharing pact. The next renewal date is Aug 24.
With Japanese Prime Minister Abe’s LDP victory in the upper house election, it is not clear whether he will move ahead with the export controls. The deputy minister for multilateral and legal affairs at the Ministry of Trade, Industry and Energy Kim Seung-ho attended the WTO meeting and argued against Japan’s trade restrictions. The Blue House is also preparing to file complaints against Japan at the WTO.
Boycott against Japanese goods and services in South Korea has intensified. South Korea’s airline T’way suspended flights to Japan and local supermarkets are refusing to sell Japanese products.
Do you agree with the government’s response to ROK-Japan standoff?
Impact is likely to be greater for which side?
On July 23, the North Korean state media released photos of Kim Jong-un inspecting a submarine capable of carrying ballistic missiles.
On July 25, North Korea fired two short-range ballistic missiles from Wonsan, Kangwon Province. The two missiles flew approximately 430km and 690km. This is the first round of provocation since May 9. The Blue House reported that these were new types of short-range ballistic missiles and the Ministry of Defense urged North Korea to exercise restraint. Observers suspect that North Korea coordinated the date of the launch with the Chinese and Russian air incursion into the KADIZ. The incident raised some concerns in South Kore as the ROK Joint Chiefs of Staff failed to predict the trajectory of the second missile.
North Korea also refused to accept 50,000 tons of South Korea’s food aid. Experts argue that this is North Korea’s way of expressing discontent at the joint military exercise, which is scheduled for next month.
John Bolton in South Korea
On July 23~24, US National Security Advisor John Bolton visited South Korea. He met the opposition party leader Na Kyung-won, Director of National Security Chung Eui-yong, Foreign Minister Kang Kyung-wha and Defense Minister Jeong Gyeong-doo. The meeting agenda included the Chinese and Russian KADIZ intrusion, North Korea, defense cost-sharing, and maritime security in the Strait of Hormuz. Experts believe that burden-sharing was the primary purpose of Bolton’s visit. Local media outlets also reported that the US demanded South Korea to contribute troops to the Strait of Hormuz.
Personnel Change in the Government
On July 26, the Blue House replaced three senior aides. Cho Kuk, Senior Presidential Secretary for Civil Affairs stepped down after more than two years in office. He is replaced by Kim Jo-won, CEO of Korea Aerospace Industries (KAI). This personnel change is interpreted to mean that Cho will be nominated as the new Minister of Justice during a cabinet reshuffle, which is expected to take place next month.
Senior Presidential Secretary of Job Creation Jung Tae-ho and Senior Secretary of Civil Affairs Lee Yong-sun have also been replaced. Newly named top aides are Hwang Deok-soon and Kim Geo-sung. Jung and Lee are expected to run in the next year’s National Assembly general election.
Bae Sung-bom, Head of Gwangju Prosecutors’ Office, was named as Chief of Seoul Central District Prosecutors’ Office. Yoon Dae-jin, Senior Prosecutor in the Ministry of Justice, was nominated as the new Chief of Suwon District Prosecutor’s Office.
On July 23, the South Korean Defense Ministry announced that one Russian A-50 early warning and control aircraft, two Russian Tu-95 bombers, and two Chinese H-6 bombers entered the Korea Air Defense Identification Zone (KADIZ). Another Russian A-50 aircraft also intruded KADIZ twice, which prompted South Korean fighter jets to fire flares and warning shots. This is the first time that the Russian Air Force entered the KADIZ.
Chung Eui-yong lodged a strong protest stating that “we take the situation very seriously and we will take much stronger measures if there is a recurrence of this event.” The Ministry of National Defense also summoned Chinese and Russian officials to lodge protests.
Blue House Senior Presidential Press Secretary Yoon Do-han told reporters that Moscow expressed “deep regret” over the incident. Hours later, however, Russia sent an official statement to South Korean MND and denied the occurrence of KADIZ intrusion. It blamed the South Korean Air Force for conducting unprofessional maneuvers threatening the safety of Russian Airmen.
FSC Chairman resigns
On July 18, Financial Services Commission (FSC) Chairman Choi Jong-ku announced that he has resigned from his position. Although one year remains in his three-year-term, FSC Chairman Choi said he offered to step down and give President Moon more options for the next Cabinet reshuffle. He denied rumors that he will run in the next general election. Candidates for the next FSC Chairman reportedly include Export-Import Bank of Korea CEO Eun Sung-soo and Korea Development Bank Chairman Lee Dong-geol.
On July 18, the Monetary Policy Board of the Bank of Korea (BoK) decided to lower its benchmark interest rate to 1.50 percent from 1.75 percent, citing Japan’s export restrictions as well as prolonged US-China trade dispute as factors in its latest decision. This is the first rate cut since June 2016. The BoK Governor Lee Ju-yeol hinted that there might be a further rate cut by the end of this year. The BoK also lowered South Korea’s growth outlook for this year from 2.5 percent to 2.2 percent.
On July 25 Kumho Industrial Co. issued a public notice to sell its entire stake (31 percent) in Asiana Airline. Kumho Industrial is planning to sell the country’s second-largest air carrier together with its six subsidiaries, including Air Busan Co., Air Seoul Inc., and Asiana IDT Inc. Major conglomerates such as SK, Hanwha, CJ, and Aekyung are reportedly seen as potential bidders for Asiana Airline, while only Aekyung expressed an interest in the deal so far.
 “文 “日경제에 더 큰 피해 경고…日, 외교의 장으로 돌아오라”,”조선일보, 2019년 7월 15일.
 “문 대통령·5당 “일본 경제보복 철회하라”,”중앙일보, 2019년 7월 19일.
 Gallup Korea, Date: July 23-25; sample size: 1,006; margin of error: +3.1 at the 95% confidence level.
 “김정은 새 잠수함 공개, SLBM 탑재 가능한 3000t급 추정,” 중앙일보, 2019년 7월 24일.
 “北, 원산서 미상 발사체 2발 발사…동해로 430㎞ 비행,” 중앙일보, 2019년 7월 25일.
 “”북 탄도미사일 쐈다” 청와대 NSC 확인,” 중앙일보, 2019년 7월 26일.
 “볼턴, ‘분담금 증액·호르무즈 파병’ 미국 관심사만 꺼냈다 ,” 한겨레, 2019년 7월 24일.
 “떠나는 조국 “촛불 부응위해 직진해 소기 성과…소임마쳐 영광”(종합),” 연합뉴스, 2019년 7월 26일.
 “문 대통령, 오늘 조국 등 청 수석 3명 교체…민정 후임에 김조원,” 한겨레, 2019년 7월 26일.
 “[속보]서울중앙지검장에 배성범…‘윤석열호’ 검찰 고위 간부 인사,” 동아일보, 2019년 7월 26일.
 “러시아 조기경보기, 오늘 아침 독도 영공 침범…軍, 전투기 출격시켜 경고 사격 대응,” 조선일보, 2019년 7월 23일.
 “정부, 러〮중 대사 불러 엄중 항의,” 조선일보, 2019년 7월 24일.
 “靑 ‘러시아, 이번 사태에 유감 표명… 즉각 조사·모든 조치하겠다 해’,” 조선일보, 2019년 7월 24일.
 “러시아 공식 전문에서 ‘영공 침범 없었다… 韓조종사들이 안전 위협’,” 조선일보, 2019년 7월 24일.
 “최종구 ‘인사권자에 사의 표명’…은성수·조성욱 등 후임 거론,” 조선비즈, 2019년 7월 18일.
 “기준금리 내리고, 성장률도 낮췄다,” 한국경제, 2019년 7월 18일.
 “아시아나 새 주인 찾습니다…SK·CJ·한화 뛰어들까,” 중앙일보, 7월 26일.
Contributing Staff (in alphabetical order): Hong Sang-hwa and Kim Seonkyung
Editor: J. James Kim