What Happened: South Korea has formally downgraded Japan from its 29-country list of top trusted trade partners, The Japan Times reported Sept. 18. However, Seoul will exempt certain products from greater scrutiny, particularly goods exported by the South Korean semiconductor industry.
Why It Matters: South Korea's latest move further deepens its trade dispute with Japan, which has been ongoing for almost three months. Seoul announced plans for the downgrade in August to place greater scrutiny on "strategically important" exports as a response to Tokyo's own trade restrictions.
Background: Japan imposed new sets of restrictions on South Korea in July and August ostensibly due to insufficient export controls, but more likely as a result of Seoul's pressure on Tokyo over its wartime legacy. Japanese exports to South Korea dropped 9.4 percent in August, with chipmaking equipment falling by 40 percent.