Why Japan and S. Korea are on different paths in latest US trade salvo

Analysts say Tokyo's hopes of a US deal not good, but are more upbeat on Seoul

- Walter Sim Japan Correspondent Wendy Teo South Korea Correspondent

TOKYO/SEOUL - Japan looks set to dig in its heels while South Korea will fire up the thrusters in trade talks, following US President Donald Trump's July 7 decision to impose a 25 per cent "reciprocal" tariff on both countries from August.

The markedly different reactions to Mr Trump's salvo - a template letter censuring the two US security allies for threatening America's national security with their "unsustainable trade deficits" - come as Japan gears up for a precarious July 20 Upper House election while South Korea is, comparatively, a political oasis after the June 3 presidential election.

Echoing the state of domestic politics, analysts were downbeat about Japan's prospects of a breakthrough during the 24-day reprieve before tariffs begin, but sanguine about South Korea's.

"The path to a solution has only got steeper," Dr Stefan Angrick, head of Japan and frontier market economics at Moody's Analytics, told The Straits Times. "I don't think the new Aug 1 deadline changes much, as there's a very real risk the ruling coalition will emerge from the Upper House election weaker than before."

Tokyo and Washington remain far apart as Mr Trump takes aim at two sacred cows that Japan's Prime Minister Shigeru Ishiba describes as issues of "national interest": Autos and rice.

But Dr Lee Mun-seob, an economist at University of California San Diego, told ST that there is "still a real chance for a last-minute agreement" between Seoul and Washington, pointing to potential offers in agriculture, energy and manufacturing that "could address Trump's core political concerns".

Analysts said it was impossible for either country to completely wipe out their trade deficits with the US, since the trade balance depends on not just exports and imports, but also factors such as financial flows, exchange rates and domestic conditions.