Korean government vows stern response to Tokyo’s pressure on Naver

The South Korean government said on Monday it will resolutely respond to any “unfair” measures by Tokyo against Naver Corp., which is reportedly under pressure to reduce its capital control in LY Corp., the operator of the popular mobile messenger app Line in Japan.

“The government plans to provide maximum support to our companies so that they can make business decisions without outside interference and under no unfavorable conditions from overseas,” Sung Tae-yoon, director of national policy at Seoul’s presidential office, said at a media briefing. “If any unfair measures are taken against our companies, we’ll respond resolutely and strongly.”

His comments mark the Korean government’s first official response to Tokyo and two Japanese companies publicly requesting Naver to shed its control over LY and cut its tech infrastructure with Line.

“Since the incident, our government’s position has been to put the interests of our people and companies first and do what's needed for them," he said.

In an apparent response to growing calls on the Korean government to take a greater role in the Naver case, the presidential official said that the government has been in close consultation with Naver to check its intentions and has also confirmed Japan’s stance on the matter through diplomatic channels.

“If Naver intends to maintain its Line stake and continue business ties with the Japanese firm, we will ensure appropriate measures are taken. At the same time, we urge Naver to use the latest incident as an opportunity to strengthen its cybersecurity,” the director said.

NAVER’S UNIONIZED WORKERS OPPOSE LY STAKE SALE

Earlier on Monday, Naver’s unionized workers said they oppose any potential sale of Naver’s LY stake to its Japanese partner SoftBank Corp.

“Any stake sale means the possibility of our technology and expertise being taken over by SoftBank, a Japanese company, and the possibility of our employees’ job security being threatened,” the union said in a statement.

“SoftBank’s intention to increase its stake as a measure to deal with data leaks does not make sense. It's also unfair,” it said.

Currently, there are about 2,500 employees at Line Plus Corp., the Korean unit of LY, and other Line-related companies in Korea.

At the center of the red-hot issue between the two neighboring countries is LY Corp., established in 2021 through a merger of Naver’s Line, the most popular mobile messenger app in Japan, and SoftBank's Yahoo Japan.

Naver and SoftBank each hold a 50% stake in A Holdings, a company controlling 64.5% of LY. If SoftBank acquires an additional stake in A Holdings, it would thus control LY, also known as Line-Yahoo.

A conflict flared up last November when Naver Cloud Corp., a unit of the Korean tech giant, suffered a cyberattack, resulting in the breach of Line users’ personal data.

The Japanese government responded not just with a call for tighter cybersecurity but also administrative guidance suggesting a complete severance of ties between Naver and LY’s IT infrastructure.

The situation escalated to the point where Japan's Ministry of Internal Affairs and Communications in March was pushing for Naver to sell its stake in A Holdings.

This culminated in LY CEO Takeshi Idezawa's firm request last week that Naver divest of its shares, citing the ministry's guidance. On the same day, LY’s board announced that Jungho Shin, LY’s chief product officer and its only Korean board member, would step down from the board.

SoftBank CEO Junichi Miyakawa said last week it is in talks with Naver over the fate of their joint management of LY, and that the two parties are working to reach an agreement by July.

‘NO ANTI-JAPANESE FRAME’

Seoul’s Presidential Office said the Naver issue should not be used to provoke anti-Japanese sentiment among Koreans as some politicians from the opposition parties claim the Korean government isn't properly responding to Japan over the case.

“Putting the Naver incident into an anti-Japanese frame will only damage Korea’s national interests. Also, it is not helpful in protecting Korean companies’ interests overseas,” Sung said.

Earlier this month, Naver Chief Executive Choi Soo-yeon said Japan’s administrative guidance for Naver to sell down its control in LY is “highly unusual.”

She said she is undecided on Naver’s relationship with LY, although Naver is ready to accept Tokyo’s request to separate its information technology infrastructure from LY.

Write to Seung-Woo Lee and Ju-Hyun Lee at leeswoo@hankyung.com

In-Soo Nam edited this article.