Naver/Line Gets Political, Troubled Real Estate Financing,USD/KRW Threats to Growth

Korea Expresses Regret Over Japan's Pressure on Naver

The Korean government has belatedly expressed "regret" over Japan's pressure on internet giant Naver to sell its stake in the Line messaging app, after initially taking a cautious stance to avoid disrupting improving bilateral ties. The issue has sparked a domestic political firestorm and accusations that the Yoon administration prioritized relations with Japan over defending Korea's economic interests.

Japan's Ministry of Internal Affairs and Communications has raised concerns over data security at Line given Naver's access and influence. In March and April, it issued administrative guidance calling for a review of Line's ownership structure. This was widely seen as pressuring Naver to sell its 50% stake in Line's parent company to its Japanese partner SoftBank.

Naver confirmed it is in talks with SoftBank over a potential sale, but the two sides remain far apart on valuation. The Korean firm is seeking to include a management premium given Line's strategic importance, while SoftBank is pushing for a lower price. Naver's employees are protesting the sale, saying it would mean ceding control of a key future growth driver.

The Korean government initially refrained from directly criticizing Japan, saying it respected Naver's position and would engage in discussions with Tokyo. But this cautious approach drew fire from lawmakers and the public, who accused the Yoon administration of neglecting its duty to defend Korean firms from unfair foreign pressure.

Facing mounting criticism, the government hardened its rhetoric last week. Second vice minister of science and ICT Kang Do-hyun expressed "regret" that Japan's actions were "perceived as pressure" on Naver to sell, and vowed to respond "resolutely and strongly" to any unfair treatment of Korean firms. The foreign ministry also raised the issue with Japan, calling for transparency in administrative guidance.

However, the belated verbal protest was seen as insufficient by many, given the high economic and political stakes involved. Lawmakers from both ruling and opposition parties have called for a formal government investigation and response, warning that yielding to Japan's pressure would set a dangerous precedent. Some accused the Yoon administration of neglecting economic security in its eagerness to mend ties with Tokyo.

The Line incident has fanned anti-Japanese sentiment, just as the two countries are seeking to move past historical disputes and strengthen cooperation against shared threats like North Korea. It has also exposed the vulnerabilities of Korean firms operating in key overseas markets, and raised questions over the government's willingness to go to bat for them in contentious situations.

For Naver, the forced sale of Line would mean giving up a key growth engine in Japan and Southeast Asia, where the app is a leading messaging platform. It could also complicate efforts to expand its reach as an AI and cloud services player. The incident may lead other Korean firms to reevaluate the risks of doing business in Japan, and prompt calls for reciprocal measures against Japanese firms in Korea.

The spat comes at a sensitive time for Korea-Japan ties, as the two sides work to restore trade links and strengthen security cooperation under the US-led "Quad" partnership. But economic tensions are never far from the surface, be it Japan's export curbs on key materials or Korea's court rulings on wartime forced labor. The Yoon administration will need to tread carefully to avoid the Line issue inflaming public sentiment and setting back hard-won diplomatic progress.

Government Moves to Restructure Troubled Real Estate PF Market

The Korean government is rolling out measures to restructure the troubled real estate project financing (PF) market, as defaults and delays threaten to undermine the broader financial system. The move comes as the property market slumps under the weight of higher interest rates and tighter regulations, leaving many PF projects in limbo.