Korean pension fund reviews Japan investments over ‘war crimes’
South Korea’s state-run pension fund is reviewing more than $1bn of investments in Japanese companies that operated during Japan’s colonial rule over the Korean peninsula as the economic fallout from a dispute between Tokyo and Seoul over wartime reparation worsens.
The National Pension Service of Korea has started to assess whether investments in as many as 75 companies — which totalled Won1.23tn ($1.1bn) at the end of 2018, and include Mitsubishi Heavy Industries, Panasonic, Toshiba and Toyota Motor — should be dropped if it can be proved the companies were linked to Japan’s war efforts.
“We are in the process of adopting a new guideline of responsible investment and we are reviewing whether Japanese ‘war crime companies’ should be excluded from our investment list,” Kim Sung-joo, NPS chair, told the Financial Times in Seoul.
“In order to do that, we need to develop a clear definition of ‘war crime companies’; whether they actually participated in war crimes,” Mr Kim said.
MHI, Toshiba and Toyota declined to comment on the South Korean investigation. Panasonic did not respond to a request for comment.
The move is likely to prove highly provocative in Japan, particularly if it succeeds in shining a spotlight on the histories of a large number of Japanese companies that are household names.
The NPS, the world’s third largest sovereign pension fund, with more than Won700tn ($580bn) under management, currently defines “war crime companies” as groups that provided military equipment and labour for Japan’s efforts during the second world war.
The fund’s review comes as relations between Tokyo and Seoul are at their lowest point in decades.
South Koreans have long held grievances over Japanese rule, which lasted from 1910 to 1945, particularly over the treatment of workers and the enslavement of so-called “comfort women”.
The latest dispute stems from a South Korean court ruling last year allowing individual claims over wartime servitude to be made against Japanese companies.
Tokyo says such compensation claims were settled under the terms of a 1965 treaty — and the $500m paid to the South Korean government in aid and loans at the time.
Following the court’s decision and failed attempts to take Seoul to arbitration, the government of prime minister Shinzo Abe has imposed tougher checks on exports of key materials and components to South Korea, a move that threatens to sting the South Korean economy by potentially disrupting production among electronics manufacturers.
Tokyo’s actions have been viewed as retaliation by the government in Seoul. The dispute has sparked boycotts of Japanese-made goods across South Korea and spurred calls from some politicians for the NPS to ditch some of its investments in Japan.
Kim Kwang-soo, an opposition legislator who has drafted a law to ban the pension fund from investments in Japanese companies linked to the second world war, said the fund’s financial holdings were “against public sentiment”.
Mr Kim, the NPS chair, said the fund’s review was not ordered by the administration of Moon Jae-in, the South Korean president.
“So far, I have not received any form of pressure from the government in managing the fund. This is the clear philosophy of the Moon administration and my firm principle,” he said.
While the issue of the fund’s Japanese investments has been “raised for several years”, the current dispute “has made us review the issue more thoroughly”, he added.
Additional reporting by Leo Lewis in Tokyo