Japan PM In Seoul, Aims To Boost Economic Ties

A possible drag on formal talks between the two leaders comes from lingering animosity in South Korea at Japan`s 1910-1945 colonial rule.

Japanese Prime Minister Taro Aso began a visit to South Korea on Sunday that is likely to focus on building economic ties and steer clear of lingering disputes as the two countries battle the global financial crisis.

Aso and South Korean President Lee Myung-bak have both seen their support rates tumble as prospects for their export-dependent economies have dimmed. The two countries also have their eye on China's growing economic and diplomatic clout.

"It will be much more effective for South Korea to work with Japan in responding to China's potential (as an economic power)," said Lee Myon-woo of the Sejong Institute near Seoul. China is the top trading partner for both countries.

A possible drag on formal talks between the two leaders on Monday comes from lingering animosity in South Korea at Japan's 1910-1945 colonial rule over the Korean peninsula, with protesters already mounting small rallies in Seoul demanding compensation from Japan.

Aso, who brought a delegation of business leaders with him to Seoul, indicated he was concentrating on commercial links.

"I firmly believe that the president and I can build a win-win bilateral relationship that will be mutually beneficial for the businesses of the two countries," Aso told a luncheon meeting of Korean and Japanese business leaders.

In a sign of what could be in the offing, a Japanese daily said Japanese auto giant Toyota Motor Corp would use steel made by South Korea's POSCO in its Japanese output for the first time to cut costs.

Both countries are suffering from the global economic crisis.

South Korea's won currency has been hit by concerns that Asia's fourth-largest economy is among the most vulnerable to the turmoil. Many analysts predict the economy will contract this year for the first time in 11 years by as much as 3 percent.

Japan, the world's second-biggest economy, slid into recession in the July-September quarter and analysts say its GDP in the October-December period would likely have contracted the sharpest in 34 years.

NORTH KOREA TO BE ON AGENDA

The two countries agreed last month on a currency swap deal of around $20 billion, which involves trading exclusively in the two countries' currencies.

Aso and Lee are expected to confirm the importance of preventing protectionism and will try to bring new life to sputtering discussions on a bilateral free trade deal.

"It will be good to strengthen the cooperation between the two countries and move forward the free trade agreement," Lee said at a meeting with Aso and the business leaders from Japan and South Korea.

They will also discuss how to move forward stalled international talks on ending North Korea's nuclear programme.

Aso's visit marks the resumption of "shuttle" diplomacy between the two Asian neighbours, which stagnated after a territorial spat flared up in July and Aso's predecessor abruptly resigned in September. However, Aso and Lee have met every month since October at global gatherings.

Both Japanese and South Korean foreign ministry officials said a long-running feud over a set of desolate islands located about the same distance from both countries, called Dokdo in Korean and Takeshima in Japanese, is not on the agenda.

The islets lie near fertile fishing grounds and possible maritime deposits of lucrative natural gas hydrate.

Tempers flared in July when Seoul protested what it saw as a fresh claim from Tokyo to the disputed islands.

Last week, Aso, 68, acknowledged in parliament that his family firm had used Korean forced labourers and Allied POWs in a mine during World War Two. Aso has said he had no personal knowledge of the mine since he was just a child at the time.