SEOUL (BLOOMBERG) – South Korea’s Financial Services Commission (FSC) said it will give “swift and sufficient” financial support to companies affected by Japan’s export restrictions in an effort to limit the impact on the South Korean economy.

Financial institutions including the Korea Development Bank will immediately extend the debt maturity of companies affected by Japan’s export restrictions by a year, while commercial banks will voluntarily carry out the measure, FSC Chairman Choi Jong-ku said in a statement on Saturday (Aug 3).

South Korea and Japan stepped up their fight over trade this week, leaving little room for a quick way out in the dispute that threatens to damage security ties and global supply lines.

Japan removed South Korea from its list of trusted export destinations, while the latter said it plans to cross its neighbour off a preferred-trade list.

The South Korean government plans to expand liquidity supply through various financial supporting programmes, according to the FSC.

It is prepared to stabilise financial markets, Mr Choi said. The FSC has started operating an emergency response team to monitor the situation and its impact on businesses.

South Korea’s parliament approved an extra budget on Friday to support a sluggish economy. It included about 273.2 billion won (S$312 million) as a response to Japan’s expanded export restrictions.

The removal from the white list is expected to be effective later this month.

It will threaten South Korea’s semiconductor and display sectors as uncertainty over imports of key materials from Japan makes it harder for companies to plan their operations, further disrupting key global supply chains.

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