August 2019 Political Situation and Prospects

[Monthly Prospects] August 2019 Political Situation and Prospects

❏ General Review of Government in July 2019 - Japan's export curbs work favorably for President Moon - Support of political parties remain similar, but LKP’s approval rating drops slightly - Neutral party support decreases while progressive base expands - Japan's export curbs outweighed the disadvantages that the ruling party experienced in July

❏ Analysis of Public Sentiment on Japan’s Export Restrictions - Anti-Japan sentiment grows stronger following South Korea and Japan’s Trade War - Supporters of LKP go against public sentiment - Koreans are dissatisfied with the government's response to current issues - Public sentiment may shift if Korea incurs further damages

❏ Main Events and Prospective Trends of August - Main events and other notable matters in August - Concerns on Korea’s elimination from the whitelist

❏ Three Main Points in Politics for August ① How will President Moon respond to the strengthened export curbs? ② Would the Korea-Japan feud spread to a conflict between the people? ③ Will the LKP choose to follow public opinion or go against it?

[Monthly Prospects] August 2019 Political Situation and Prospects

￭ Review of Government in July 2019

❏ Japan's export curbs work in President Moon’s favor ❍ While there have been mixed reviews about President Moon’s administration since March, the administration ended July with a positive evaluation (source: Korea Gallup)

❍ The export curbs imposed by Japan aroused patriotism in many Koreans, leading to general support of President Moon. - Foreign affairs that motivate strong patriotism usually lead to consequent public support for the government. - President Moon will continue to gain support as the export curb issue is unlikely to be resolved soon. - The positive increase seen in the first week of July is likely due to the aftermath of the North Korea- South Korea-US meeting at Panmunjom.

July Week 2, Major Incidents - 07/08 Yoon Seok-youl’s confirmation hearing as Prosecutor- General nominee July Week 1, Major Incidents - 07/10 President Moon meets with heads of major - 07/04 Japan tightens regulations on exports that apply to Korea conglomerates in the Blue House (3 materials) - 07/12 Officials of Korea and Japan meet to discuss export curbs / Minimum wage confirmed to be 8,590 KRW - 07/14 President Moon issues an apology for not achieving his presidential campaign promise of raising the minimum wage to 10,000 KRW by 2020

July Week 3, Major Incidents July Week 4, Major Incidents - 07/15 President Moon warns Japan about export curbs - 07/23 Chinese and Russian jets enter airspace over Dokdo - 07/18 President Moon meets with the leaders of 5 political Island parties - 07/25 North Korea fires a short-distance missile

❏ Support of political parties remain similar, but LKP’s approval rating drops slightly

2 ❍ Although the significance of Japan’s export curbs is currently overshadowing all other issues and increasing support for the President, the ruling party is failing to see a corresponding increase in support. - Ratings for the DPK (Democratic Party of Korea, the ruling party) did not fluctuate in July as the party did not stand out during the crisis of the export curbs. - In terms of President Moon’s administration specifically, Cho Kuk (the former Presidential Secretary) made a strong statement about the export regulations. However, the DPK did not issue any distinct messages about the crisis.

❍ While President Moon’s administration is gaining support from the public, the LKP (Liberty Korea Party, a major opposition party) is seeing a slight decrease in ratings. - Despite the external crisis, the LKP continued to focus on domestic issues and appeared to be uninvolved with important foreign affairs. - Although the decision of Hwang Gyo-ahn (leader of the LKP) to hold a meeting with the President to discuss foreign and economic affairs was positively received as a timely move, the party failed to emphasize the proceedings of this meeting.

Approval Rating of Government Parties (4th week of July, 2019) (source : Korea Gallup / unit:%)

50 40 40 40 40 40 38 39 39 38 39 38 39 39 38 39 39 39 37 37 36 36 37 40 35 35

26 26 26 26 26 27 26 26 30 24 24 25 26 25 25 25 24 24 25 24 24 24 22 24 23

20 23 24 24 24 24 23 22 21 22 21 22 22 21 21 21 19 19 20 20 20 20 19 2019 10

8 - 6 7 7 7 7 6 6 7 6 4 5 5 4 5 4 6 6 5 6 5 6 5 6

DPK LKP Bareunmirae Nonpartisan

❍ The decrease in support for the LKP led to a consequent increase of nonpartisan support. - Approval ratings for the LKP and nonpartisan independent politicians continue to have an inverse relationship.

❍ Meanwhile, the Bareunmirae Party is maintaining a similar approval rate despite internal conflicts.

3 - Unless major issues arise from the party—such as political fission—support for the party will continue.

❏ Neutral base shrinks while progressive base expands ❍ The distribution of subjective political ideology for the fourth week of July shows that conservative base is 24%, neutral base is 27%, and progressive base is 31%. (source: Korea Gallup)

❍ As the dispute between Korea and Japan has led to heightened conflicts between political parties, the ideological attitude of the public is becoming clearer. - The presidential secretary delivered a strong message about the current issue with Japan, thus revealing the dichotomy of different political ideologies. - The neutral base started to decrease from the third week of July and ended the month at 27%.

❍ The influence of the progressive base strengthened as neutral supporters leaned toward the progressive side. - Support for the administration also affected the ideological attitude of the people. - The proportion of conservative supporters remained at around 24% without noticeable change.

❏ Japan's export curbs outweighed the disadvantages that the ruling party experienced in July ❍ Major agenda/issues in July are categorized as below according to the level of influence on the current administration. (* newly added agenda/issues)

Positive Agenda/Issues Medium Agenda/Issues Negative Agenda/Issues - Government announces - Temporary workers’ strike - NK and US launch negotiations economic policy plans for the - Postal Workers’ Union plans - Investigation of parliament second half of 2019 national strike members pertaining to ‘fast- - National Assembly is - Investigation of North track’ normalized Korea’s undetected fishing - Final verdict of former president - Yoon Seok-youl’s confirmation boat in Samcheok port Park hearing as Prosecutor-General - Decision of next year’s - Monetary Policy Board lowers nominee minimum wage interest rate - Passage of budget bill and - Decision of political and

reform bill judicial reform committee

- Presidential cabinet reshuffle chairs

*Japan announces export curbs *Chinese and Russian jets invade *Jeong Kyeong-doo plans to on Korea the airspace of Dokdo Island resign *Korea carries out quick response ➡ *Budget bill and reform bill are to export curbs not processed *Arrest of North Korean spy *North Korea fires ballistic missile

❍ Although the ruling party faced many negative issues and agenda during the month of July, the massive issue of Japan’s export curbs dominated all other matters. - President Moon and former presidential secretary Cho Kuk publicly condemned Japan, thus invoking patriotism and national pride amongst the Korean public. - Swift diplomatic responses to the export curbs emphasized the severity of the situation as a national crisis. For instance, the second deputy head of the presidential National Security Office visited the United States to raise the issue to the WTO.

5 - Korean consumers voluntarily participated in a widespread boycott of Japanese products, which also served as an advantage for the ruling party. ❍ Despite public attention on the current Korea-Japan feud, the LKP failed to recognize the sentiment and continued to instead criticize the administration. - LKP’s criticism of President Moon can be seen as a justified response to his lack of preparation for Japan’s imminent retaliation to the Korean Supreme Court ruling that demanded Japanese payment for wartime labor. - However, as the LKP issued one-sided criticism toward the administration without acknowledging the actions of Japan, the Korean public dismissed the party as being pro-Japan.

￭ Analysis of Public Sentiment on Japan’s Export Curbs

❏ Anti-Japan sentiment grows stronger following Japan’s export curbs ❍ The issue of Japan's export regulations on Korea is unlikely to be solved in a short period of time. ❍ On August 2, Japan held a cabinet meeting to discuss the proposal of removing Korea from the whitelist. - The revision was consequently passed as a result of this meeting, and the change will take effect as early as August 23rd. - With Korea’s elimination from the whitelist, Japan is expected to expand export curbs on a wider range of products, thus imposing further damage on Korean industries.

❍ Anti-Japanese sentiment will continue to escalate after Japan finalizes the removal of Korea from the whitelist. It is expected to hit its peak on National Liberation Day (August 15th), which commemorates the liberation of Korea from Japanese imperial rule.

❍ A survey conducted in Korea revealed that approximately 80% of Korean citizens are “unwilling” to purchase Japanese products, thus revealing heightened anti-Japanese sentiment throughout the Korean public. (source: Korea Gallup, survey results from the fourth week of July, 2019) - Anti-Japanese sentiment is similarly felt for all Koreans; the ratio of respondents who expressed “unwillingness” to purchase Japanese products is constant regardless of political ideology, age, and occupation.

❏ Supporters of LKP go against public opinion ❍ In a survey that asked whether Korea or Japan was more responsible for the conflict between the two countries, 61% of Koreans responded that the Japanese government is responsible. (source: Korea Gallup, survey results from the second week of July, 2019) - This sentiment is similarly observed throughout all ages and occupations.

❍ However, LKP supporters place more responsibility on the Korean government. - When assessing the survey results according to supported political party, it is revealed that 40% of LKP supporters believe that the Korean government is responsible while only 33% indicate that Japan is to blame. - In terms of political ideology, however, the general conservative population believes that the Japanese government is liable. This may indicate that the notion that Korea is responsible for the conflict between the two countries is specifically an opinion held by LKP supporters.

❍ The LKP issued strong criticism on President Moon’s response to the actions of the Japanese government. - As the LKP’s opinion on current matters goes against public sentiment, this will lead to a further gap between the party and the general Korean public. - This is analyzed as the reason for the decrease in LKP’s approval rating in July.

❏ Koreans are dissatisfied with the government’s response to current issues ❍ Although 80% of Koreans are unwilling to purchase Japanese products and 61% believe that Japan has more responsibility in the conflict, some people are also dissatisfied with the Korean government. (source: Korea Gallup, survey results from the fourth week of July, 2019) - 50% state that “the government is managing the situation well,” while 36% believe “the government is not managing the situation well.”

8 ❍ Opinions on the government are largely dependent on the “political side” that people choose to identify with. - Taking a “political side” indicates when one follows the general opinion of people that hold similar political ideology instead of actively analyzing the actions of the President themselves. - More conservatives believe that the government is “not doing well,” while progressives think that it is “doing well.” - Although opinions are split for neutrals, more people responded that the government is “doing well.”

❍ As Japan’s export curbs have a direct influence on Korea’s economic status, it is a critical concern that the ruling and opposition parties are failing to work together on this issue. - The situation is merely being utilized as an opportunity for the two parties to argue.

❏ Public sentiment may shift if Korea incurs further damages ❍ 54% of Koreans believe that Korea will experience more damages from the current conflict than Japan will. (source: Korea Gallup, survey results from the fourth week of July, 2019) - Only 27% of respondents think that Japan will be more affected.

❍ The belief that Korea will sustain more damages is apparent throughout the general public, regardless of age, political ideology, and occupation. - Conservatives do not display a distinct predilection, with 42% believing that Korea will face more consequences and 40% stating that Japan will. - In terms of age, people aged 19~20s were equally divided on whether Korea or Japan would sustain damages (44%), while people in their 30s stated that Japan would be more negatively affected. - In terms of occupation, only students stated the opinion that Japan would incur more damages than Korea.

❍ Among those who believe that the Korean government is managing the conflict adequately, a larger portion further expressed the opinion that Japan will take on more damages. - If the Korea-Japan feud worsens and damages inflicted on Korea increases, it is expected that those who initially had positive notions of the government will shift their opinion. - The ruling party faces a higher political risk if the feud between the two countries continues for an extended period of time as it may also affect next year’s election.

10 ￭ Main Events and Prospective Trends of August

❏ Main events and other notable matters in August

July 29 (Mon): Extraordinary parliamentary session begins Main events July 30 (Tue): US FOMC meeting (~31) 1st Week August 2 (Fri): Japan’s decision to eliminate Korea from the whitelist

Notable matters Results of Japan’s cabinet meeting

Main events - 2nd Week

Notable matters Cabinet reshuffle; Cho Kuk’s cabinet joining

August 15 (Thu): President Moon’s commemoration speech for Main events National Liberation Day 3rd Week

Notable matters Content and focus of President Moon’s speech

August 23 (Fri): Korea’s elimination from the whitelist takes effect August 24 (Sat): 90 days to the expiration of the agreement between Main events Korea and Japan on the Protection of Classified Military Information; 4th Week G7 summit in France (~26)

Notable matters Consequences of Japan’s elimination of Korea from the whitelist

August 27 (Tue): Extraordinary parliamentary session ends August 30 (Fri): Meeting for direction of Monetary Policy Main events September 31 (Sat): Expiration date for activity of political and judicial th 5 Week reform committee

Notable matters Minister candidate hearing (tentative)

※ Overseas schedule is based on local time / ※ Korea-US joint command military exercise in August (3 weeks)

11 ❏ Concerns on Korea’s elimination from the whitelist and Japan’s export curbs will continue to persist in August ❍ Japan’s actions on export regulations will be a major topic of discussion in August. - It is expected that the elimination of Korea from the whitelist will take effect on or around August 23rd. - Anti-Japanese sentiment will continue to grow as the media discusses Japan’s actions and decisions.

❍ Amid this situation, national pride and patriotism will heighten on National Liberation Day (August15), particularly after President Moon gives a commemoration speech that will most likely intensify anti- Japanese sentiment. - President Moon is expected to address Korean reunification during his speech, thus inciting patriotism and steering public opinion toward the necessity of reuniting the two Koreas.

❍ Japan’s export curbs and the resulting animosity toward the country will likely have a positive influence on analysis of the current Korean government. - Although opposition parties will continue to issue criticism toward the government—such as the President’s inadequacy of dealing with foreign affairs—they will not have a significant effect. - Various agenda/issues that would have negatively affected the administration are foreseen to be overshadowed by the ongoing feud with Japan.

❍ Major agenda/issues in July are categorized as below according to the potential level of influence on the current administration.

Positive Agenda/Issues Medium Agenda/Issues Negative Agenda/Issues

- Criticism from the opposition - Cabinet reform (Cho Kuk’s -Japan’s elimination of Korea from party regarding foreign affairs cabinet placement) and the whitelist - Forecasted economic downturn confirmation hearing -President Moon’s commemoration - Budget trend of the second half - Passage of budget bill and speech on National Liberation Day of 2019 reform bill -Korea’s boycott of Japanese - Concerns about real estate - Korea-US joint military exercise products prices upon further interest rate - Issue of Korea-Japan -Parliament member investigation cuts Protection of Classified pertaining to ‘fast-track’ - Collapse of political and judicial Military Information reform committee

❍ As the main opposition party, it is necessary for the LKP to accept the public’s opinion on the conflict between Japan and Korea and devise adequate actions and messages in response to Japan.

12 - If the LKP continues to only censure the government regardless of public sentiment, it will likely cement the image of being pro-Japanese.

￭ 3 Main Points in Politics for August

① How will President Moon respond to the strengthened export curbs?

❍ In line with expectations, Japan has proceeded to eliminate Korea from the whitelist and the conflict has failed to be resolved. - On July 4th, Japan announced export curbs of two materials that specifically targeted Korea, by which point its plan to remove Korea from the whitelist had already been revealed.

❍ From this point forward, Korea’s status will change as detailed below:

13 ❍ Many Korean industries are expected to incur damages if Japan’s export curbs continue to strengthen.

❍ Global finance institutions also evaluate that the export curbs will harm the Korean economy more than the Japanese economy. ❍ S&P (global credit rating agency) warned that Korea's leading industries may lose credit due to Japan's export regulations. - On July 10th, S&P analyzed that the credit rating of Korean industries is indeed falling as a result of the Korea-Japan trade conflict, and lowered the economic growth forecast of Korea from 2.4% to 2.0%.

❍ Morgan Stanley (US investment bank) also decreased the forecasted GDP growth rate of Korea from 2.2% to 1.8%, citing the trade feud as a source of downward pressure on Korea’s economy. - Additionally, Nomura Securities of Japan also lowered the forecast of Korea's growth to 1.8%, while ING Group of the Netherlands forecasted a rate of 1.5%.

※ Details of Japan’s export regulations can be found in Ipsos no. 52 ࡔJapan’s Reason behind Export Curbs

on Korea and Prospectsࡔ (July 15th, 2019)

❍ Korea does not have many options within the current situation. - The Korean government formulated measures such as a WTO suit against Japan, developing channels for obtaining necessary materials from other sources, and producing materials domestically, but such measures only offer long-term solutions. - Damages to Korea’s industries will continue to worsen unless the government is able to devise stable solutions.

❍ As the Korean government will not yield to Japan’s demands, it is necessary for President Moon to deliver a strong political message to the Korean public. - A political speech will express Korea’s firm stance against Japan and rally Koreans to unite and overcome the crisis as one. - Such political messages have already garnered support for the government.

❍ Consequently, there are high expectations for President Moon’s speech for the National Liberation Day commemoration ceremony on August 15th. - While President Moon is expected to deliver a strong message, he may also suggest a new diplomatic solution for Japan.

14 ❍ From a political perspective, the public’s response to President Moon’s speech must be observed closely. - Will Koreans receive the speech positively despite the forecast of an extended economic downturn? - Will Koreans consider the speech to be an empty promise and promptly take back the support that has been given to him so far? - The response of the public may have a significant effect on the future direction of Korean politics.

② Would the Korea-Japan feud spread to a conflict between the people? ❍ Since the imposition of Japan’s export curbs on Korea, there has been widespread participation in the boycott of Japanese products.

❍ In terms of public perception, Koreans consider Japanese people to be “likeable” (41%), although only 12% consider the country itself to be “likeable.” (source: Korea Gallup, survey results from the second week of July, 2019) - This indicates that the current situation has not led to a consequent rise of hatred toward the people of Japan.

❍ However, following a strengthening of Japan’s export curbs in August and media coverage on resulting damages to Korean industries, public sentiment toward Japanese people may decrease. - If the current feud spreads to a larger dispute between the people of the two countries, it is highly likely that the people will oppose the efforts of the governments to reconcile.

❍ Only 39% of Japanese people find Koreans to be “close,” according to a survey conducted in December 2018. (source: Japanese Cabinet Office) - This rate was 62% in 2010 but has mostly continued to fall since 2011. - A slight increase in 2013 can be seen as a positive point.

15 Japanese People's Feeling of Closeness to Koreans (source: Japanese Cabinet Office / unit: %) 66 70 65 63 62 60 65 62 59 58 59 59 58 57 57 60 54 55 55 55 51 50 49 50 45 47 40 46 44 41 43 41 35 41 39 41 36 39 38 38 38 39 30 34 35 32 25 33 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Feel close Do not feel close

❍ For reference, 18% of Japanese people feel close to Russians, 21% to Chinese, and 76% to Americans.

❍ 71% of Japanese respondents stated that they support the Japanese government’s export curbs on Korea (while 17% answers that they do not support the measures), which indicates that the feud between the countries may worsen. (source: Yomiuri News, survey results from July 22~23rd 2019) - If the boycott of Japanese products is perceived as a violent measure, this may lead to strong countermeasures throughout Japan.

❍ In order to avoid further conflict between the two nations and encourage reconciliation, media coverage should not portray the current anti-Japanese sentiment as extreme or violent.

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③ Will the LKP choose to follow public opinion or go against it? ❍ The current attitude of the LKP suggests that the party is not adequately responding to public sentiment regarding current issues. - While the LKP may be justified in providing constructive criticism about the government’s actions, it should not appear as a support system for Japan as that would only contradict public sentiment. - As the LKP only focused on criticizing the administration amid the crisis, support for the party decreased and people labeled it as “the opposition party without nationality.”

❍ As explained in “Analysis of Public Sentiment on Japan’s Export Curbs,” the LKP is solely focusing on the opinions of its supporters rather than the public as a whole. - Although 61% of the general public believe that Japan is responsible for the feud between the two countries, LKP supporters responded that the Korean government is more responsible. (“Korean government is responsible” 40% vs. “Japanese government is responsible” 33%) - This rate is not directly relevant to political ideology tendencies, as a larger portion of conservatives have expressed that the Japanese government should be held more accountable.

❍ The LKP is foreseen to become isolated from the general Korean public if it continues its one-sided stance.

❍ The main issue that LKP now faces is not regarding factional matters or party identity, but rather about following public opinion. - It is very unusual for a modern-day political party to disregard public opinion. - The LKP must closely analyze and decide the positions it will take only after taking current public sentiment into consideration. ❍ As the political situation will continue to be centered on Japan’s export curbs in August, attention is gathering on whether the LKP will choose to follow public opinion. - Depending on the amount of support that the LKP will gain by the end of the month, it will be possible to forecast the political trend for the rest of the year as well as the results of next year’s election.