A formal economic community between South Korea and Japan has gained substantial strategic attention because of increasing global economic uncertainty. This initiative aims to create an economic union between Asia’s second-largest economy and its fourth-largest economy due to strong economic motivations.
Such a union faces substantial barriers because past disagreements between the countries and their persistent political mistrust continue to affect their bilateral relationship. The pursuit of this economic community requires overcoming significant hurdles despite its substantial strategic advantages. East Asian integration stands on the precipice of success because of the complicated relationship between economic common interests and historical animosity.
The economic benefits of closer collaboration between nations have never been more apparent during the mid-2020s. South Korea and Japan maintain their position as major industrial nations which depend on trade because they share both economic risks and possibilities. The semiconductor industry connects these nations to the global market in 2024 and 2025 because they strongly depend on it for economic stability. The current projections indicate that South Korea will achieve $1.87 trillion nominal GDP in 2025, thanks to its strong exports of memory chips and automobiles. South Korea experienced such fast economic growth that its GDP per capita surpassed Japan’s in recent years. Japan maintains its position as a leader in high-quality materials production, along with manufacturing equipment development and advanced technology innovation, even though its growth rate has slowed down.
These two economies demonstrate a strong economic connection between them. A regional economic community would strengthen the supply network and protect it from global supply chain interruptions. A strong self-sufficient system emerges when South Korea leads manufacturing and final assembly, while Japan leads upstream materials and precision machinery production. The economic task force established in 2025 demonstrates practical progress by working to build supply chain resilience through joint initiatives that unite forces in semiconductor development and green energy sectors. The task force demonstrates increasing understanding that economic security for both parties requires common strategic efforts.
The combined economic powers of this merged economic bloc would generate a substantial impact on worldwide trade activities. The unified GDP output would equal that of Germany and several other major economies, which would give them enhanced negotiation power and increased influence on global economic policy formation. The current environment of protectionism and geopolitical rivalry requires both nations to defend against US policies while adapting to China’s technological rise. The reciprocal U.S. automobile tariffs create a shared problem which drives South Korea and Japan to work together on new trade cooperation methods to protect their trade-reliant economies. The nations would become more effective at dealing with external challenges because of their combined strength.
The two countries face an ongoing demographic challenge because of their low birth rates and rapid ageing population trends. Japan and South Korea hold positions among the countries with the lowest birth rates, coupled with the fastest-ageing populations worldwide. Japan recorded its lowest birth rate at 1.15 in 2025, yet South Korea experienced an even lower birth rate at 0.75 during the same year. Long-term economic growth, together with stable labour forces and sustainable social welfare systems, faces risk due to this demographic crisis. The creation of an economic community might help member states work together on social policies and allow workers to move between countries to address demographic issues, but this faces resistance from their homogeneous populations. The economic and social impacts of ageing populations would become more manageable through their combined efforts to share effective strategies and develop synchronised policies.
Economic arguments strongly support a South Korea-Japan economic community, yet historical and political challenges present significant barriers to its establishment. Japan’s colonial period, spanning 1910 to 1945, stands as the main obstacle that hinders the development of a South Korea-Japan economic community. Public anger and political disputes stem from historical issues, including the forced recruitment of “comfort women” for military brothels and the use of forced labour. Public opinion in South Korea shows continued distrust toward Japan even in 2025, according to survey results. The existing distrust between the nations can easily destroy diplomatic progress while creating economic damage.
The 2019 trade conflict between Japan and South Korea, through export controls on essential semiconductor materials, demonstrates how political conflicts can disrupt crucial economic relationships. Despite the current ease in tensions, the dispute reveals the ongoing weakness of their diplomatic relationship. The increase in bilateral trade between these countries has not reached its maximum potential due to ongoing political disputes. Research at the East Asia Institute demonstrates that economic ties between these nations remain underperforming compared to gravity model predictions and below what other economic regions, such as Europe, have achieved. The discussions regarding a bilateral free trade agreement (FTA) remain stalled because the agreement has not seen a successful revival since 2004.
The situation becomes more complicated because both nations maintain disputes about the ownership of the Dokdo and Takeshima territories. Nationalistic tensions continuously rise because both countries maintain their claims to these disputed islands. Every government or political initiative regarding these islands can swiftly trigger public anger, which disrupts existing diplomatic relations. These matters deeply influence national sovereignty while politicians use them to advance their domestic agendas. The current fragile reconciliation between the nations exists mainly because they share strategic interests against North Korean threats and U.S.-China competition instead of resolving past historical disputes. During its 2025 inauguration, the new liberal South Korean government started to pressure Japan about its historical actions instead of following its previous conservative administration’s more conciliatory stance.
Establishing an economic community requires strong political dedication from both nations, together with public bravery that goes beyond momentary strategic agreements. Both countries need to develop authentic mutual trust for this powerful vision to become a reality. The path toward genuine reconciliation requires consistent work to resolve past conflicts while maintaining awareness of the feelings of both national groups. Although the relations between South Korea and Japan show gradual improvement during 2025, this economic community will succeed only if leaders overcome past issues to build a more secure, prosperous future.
The opinions expressed in this article are the author’s own.
References
Korea JoongAng Daily. (2025, June 23). Korean business leaders urge closer economic ties with Japan amid U.S.–China rivalry. Korea JoongAng Daily.
Korea JoongAng Daily. (2025, May 28). Korean, Japanese biz leaders agree to boost cooperation in AI, chips, CPTPP entry. Korea JoongAng Daily.
Yu, H.-s. (2025, April 21). Korea JoongAng Daily. South Korea’s next gov’t must cooperate with Japan. Korea JoongAng Daily.
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