If Korea and Japan Unite, the World Order Will Change... "The Optimal Combination to Complement Weaknesses" [Korea's Great Transformation, Korea-Japan Future Cooperation]

60 Years of Korea-Japan Relations: Toward Future Cooperation Partners
Joint Market Talks Re-emerge on the 60th Anniversary of Normalized Diplomatic Ties
Combined Korea-Japan GDP Ranks Third Globally... Significant Potential for Domestic Market Expansion
"Now Is the Optimal Time to Design Institutional Structural Cooperation"
Lee Jaemyung and Shigeru Ishiba Reaffirm Commitment to Cooperation at Summit
"No Longer Competitors"... Unified Voice from the Business Community

South Korea and Japan, two nations with striking similarities, now stand together at a pivotal crossroads. Both countries are facing structural crises such as low birth rates, aging populations, and labor shortages, while also confronting the limitations of export-driven growth models. These challenges are prompting calls for a fundamental transformation of their economic systems. On top of this, external shocks such as the US-China technological rivalry and the global restructuring of supply chains have intensified the situation, fueling the argument that a collaborative strategy through a "joint market" is now essential, rather than individual responses. Analysts note that if the two economies are combined, they would form the world’s third largest economic bloc after the United States and China, highlighting the significant potential impact of such cooperation.

According to the International Monetary Fund (IMF) as of June 20, 2025, Japan’s nominal gross domestic product (GDP) in 2024 is approximately $4.21 trillion, while South Korea’s is about $1.78 trillion. Combined, this amounts to roughly $5.99 trillion, making it the third largest in the world after the United States and China. The combined population of the two countries also reaches about 170 million people.

Kim Bongman, Head of the International Division at the Federation of Korean Industries, stated, “If the populations of South Korea and Japan are combined, the domestic market could expand much like the European Union (EU). The greatest advantage of cooperation is that even a single product can be sold in a much larger market, meaning the market itself grows.” He further explained, “South Korea faces structural limitations in its domestic market, while Japan suffers from a shortage of labor. This makes them optimal partners to complement each other’s weaknesses. From an industrial perspective, now is the ideal time to institutionally design structural cooperation.”

The new government’s commitment to cooperation with Japan was also confirmed through remarks by President Lee Jaemyung. During a recent summit with Japanese Prime Minister Ishiba Shigeru, held on the sidelines of the Group of Seven (G7) summit in Canada, President Lee stated, “Although there are minor differences, I hope that South Korea and Japan can overcome these and develop a relationship of mutual cooperation and benefit.” Prime Minister Ishiba responded, “On the occasion of the 60th anniversary, I sincerely hope that cooperation and collaboration between our two countries will contribute even more to the world.”

The momentum for strengthening South Korea-Japan economic cooperation has been building rapidly in recent times. Choi Taewon, Chairman of the Korea Chamber of Commerce and Industry, recently stated at the Nikkei Forum in Tokyo, “The two countries should no longer be seen as competitors, but as partners for cooperation. An integrated market that expands both production and consumption is needed through the elimination of tariffs and institutional reforms.” He especially emphasized that “practical areas of cooperation that can start immediately include joint procurement of hydrogen and liquefied natural gas (LNG), as well as collaboration in the silver industry.”

Both countries are facing common structural crises: low birth rates, aging populations, and labor shortages. In Japan, 29.1% of the total population is aged 65 or older, with the elderly population reaching about 36.7 million as of 2024. In South Korea, the proportion of people aged 65 and over is expected to reach 20.6% by 2025. Analysts suggest that these shared crises could enable shared solutions.

Beyond economic scale, the two countries also exhibit clear industrial complementarity. Japan has strengths in materials, components, and equipment, while South Korea is competitive in system semiconductors, batteries, and ICT. There is already deep technological and component integration between companies from both countries within the global manufacturing value chain. Experts believe that, if institutional and regulatory frameworks are harmonized, there is a solid foundation for operating as a de facto single market.

There are also calls for structural cooperation to turn these crises into opportunities. Key areas include welfare and healthcare, boosting productivity through digitalization, and joint research and development (R&D) and technology collaboration through demonstration projects. Medical robots, digital rehabilitation devices, and smart devices for the elderly are cited as concrete models, where Japanese care facilities can serve as testbeds and Korean companies can secure initial data to prepare for entry into regulated markets.

There are also expectations that small and medium-sized enterprises (SMEs) could achieve both cost savings and market diversification by jointly entering third-country markets using shared brands, digital platforms, and integrated logistics. This is also being highlighted as a strategy for jointly responding to the turbulent global trade environment, which is increasingly affected by high tariffs, technological regulations, and the weaponization of supply chains.

Lee Jipyung, Professor at the Department of Convergence Japanese Studies at Hankuk University of Foreign Studies, stated, “Future cooperation between South Korea and Japan should not be about simple benefits or subordination, but about recognizing each other’s strengths and dividing roles. The discussion of a single market is not just an ideal, but a realistic solution to the shared crises of low birth rates and supply chain risks.” He also emphasized, “The foundation of cooperation begins with lowering both the physical and psychological barriers, to the point where people can travel without passports.”