Japan’s Vigilance on Digital Security: Line App Under Scrutiny
In an era where digital security is paramount, Japan’s recent focus on the messenger and social media platform Line has raised eyebrows and generated a buzz in diplomatic circles. Serving as a virtual lifeline for nearly 70% of Japan’s populace, Line, operated by Line Yahoo, finds itself at the crossroads of a potential diplomatic rift between Japan and South Korea. The stakes are high, as Line is a 50-50 joint venture between Japan’s SoftBank and South Korea’s tech behemoth, Naver.
The roots of the current predicament trace back to a significant data breach in late 2023, pinned on a compromised Naver cloud server. The incident sparked a reaction from the Japanese government, which has since issued not one, but two rounds of administrative guidance to Line Yahoo. The advisories called for a thorough review of the financial entanglements with Naver, signaling a clear message about Japan’s stance on data security and national interest.
While South Korea’s Ministry of Foreign Affairs has flagged concerns over potential discriminatory actions against its business entities in Japan, the underlying tension has only intensified with Line Yahoo’s contemplation of reducing Naver’s equity. This ongoing tug-of-war spotlights the ever-growing need for internationally recognized digital governance standards.
Unraveling the Nationality of Line
Conceived by Naver Japan, a subsidiary of Naver, Line’s journey has been nothing short of a rollercoaster ride. From its humble beginnings in 2011, the platform quickly became ingrained in Japan’s digital culture. The partnership with Yahoo Japan in 2019 was a strategic masterstroke, reinforcing Line’s position and, for a time, quieting debates over its national allegiance.
Yet, this perception of a harmonious balance was disrupted by two significant data breaches in 2021 and 2023, which reopened the nationality debate and brought to light Line’s operational reliance on Naver’s infrastructure in South Korea. The consequent administrative guidances from Japan’s Ministry of Internal Affairs and Communications were telling, demanding that Line Yahoo reassess and potentially recalibrate its financial ties with Naver to strengthen cybersecurity.
Amidst rising pressure, Line Yahoo’s CEO has publicly acknowledged the company’s request for Naver to downscale its investment. Naver, on its part, has not ruled out any possibilities, including selling its stake, as it seeks to navigate this complex situation alongside its partner, SoftBank.
Debating Data Security and Ownership in the Digital Landscape
The push for Naver to dilute its ownership in Line Yahoo is a marked deviation from typical government responses to data breaches. This unique approach has added a dimension of complexity to the incident, as it intertwines with the nuances of national security and the undercurrents of international trade politics.
The Japanese government’s insistence on a change in Line’s ownership structure is seen by some as a veiled attempt to curb the influence of a foreign company that has successfully penetrated the Japanese market. This perspective parallels the ongoing scrutiny faced by TikTok in the United States, where fears over Chinese government access to American data have triggered legislative action.
Seeking Resolution Through International Dialogue
With the Line issue simmering, South Korea and Japan could potentially leverage the Korea-Japan Digital Policy Forum, a ministerial-level body, to seek common ground. However, the path to resolution may be fraught with challenges as existing international platforms like the WTO have yet to develop comprehensive rules on digital trade and investment.
In the broader context, the international digital trade structure appears fragmented, with Japan and South Korea each participating in different digital trade agreements. Japan has its arrangements with the United States and the European Union, while South Korea has joined the Digital Economic Partnership Agreement (DEPA). The absence of a unified set of digital trade rules has become more conspicuous as digital trade tensions escalate globally.
With the relationship between Seoul and Tokyo already delicate, the Line dispute underscores the potential perils of unilateral action and highlights the urgency for an internationally recognized framework to objectively adjudicate such digital trade conflicts.
Authored by Haeyoon Kim, a Non-Resident Fellow at the Korea Economic Institute, and Simon Lester, a nonresident fellow for the Baker Institute International Economics Program, this article reflects their expert analysis. The original image is credited to Shutterstock. The Korea Economic Institute is a registered FARA agent of the Korea Institute for International Economic Policy, a public corporation established by the South Korean government. Further details are available at the Department of Justice, Washington, DC.
