Amidst the unfolding events of the ‘LY Corp. incident’, the Japanese government’s actions have sparked contradictions. LY Corp. has demanded the sale of its shares in Naver, signaling a push for a change in corporate governance. While Japan’s Ministry of Internal Affairs and Communications pressures Naver under the guise of administrative guidance, the Korean government maintains a principled stance, observing the situation from a distance.
During the earnings announcement on May 8, Takeshi Idezawa, CEO of LY Corp., revealed that the company officially demanded the sale of shares in Naver following the Japanese government’s administrative guidance. Simultaneously, Shin Jung-ho, a former Naver employee credited with developing LINE and currently serving as LY Corp.’s Chief Product Officer (CPO), was removed from the board.
Idezawa’s announcement hinted at an impending governance shift, with SoftBank poised to become the largest stakeholder. This suggests a potential transfer of LY Corp.’s Naver shares to SoftBank, excluding Naver from the company management.
Earlier, Japan’s Chief Cabinet Secretary Yoshimasa Hayashi emphasized that the administrative guidance aims to bolster security measures rather than reconsider the capital relationship between LY Corp. and Naver. Analysts speculate that Japan’s opaque approach aims to pressure Naver into reorganizing its shareholdings.
According to Asahi Shimbun, the Japanese government issued administrative guidance to LY Corp. twice, displeased with the report’s initial content following the data breaches. However, mentioning corporate governance is unusual, as it typically falls within companies’ autonomous decision-making realms. Speculation abounds that Japan, nicknamed the “Analog Republic,” seeks to reclaim LINE, nurtured by Naver for 13 years, as a wholly Japanese service to bolster national digital competitiveness.
Insiders note that while administrative guidance lacks legal binding, SoftBank, as a regulated mobile operator, may be influenced by government pressure, given the regulated nature of Japan’s mobile communications industry.
Despite these developments, the Korean government maintains a hands-off approach. The presidential office stated, “Our official stance is to assist Naver in the direction it desires.”
Minister of Science and ICT Lee Jong-ho emphasized the government’s reluctance to intervene in Naver’s sensitive management decisions, “as it could pose problems.” Second Vice Science Minister Kang Do-hyun deferred responsibility to the Ministry of Foreign Affairs.
The Foreign Ministry appears cautious, potentially considering diplomatic implications amid the current administration’s efforts to improve relations with Japan. After announcing on April 30, “We fully respect Naver’s request and will cooperate. We will continue to communicate with Japan,” it has not proposed any separate countermeasures. Reports suggest that the Foreign Ministry even arranged media interviews for Japanese Ministry of Internal Affairs and Communications officials to voice their opinions, rather than expressing any objections.
Kim Sang-bae, Professor of Political Sciences and International Relations at Seoul National University, commented, “The Japanese government is approaching the digital platform industry from the perspective of national security strategy,” adding, “Our government should not leave the platform market only to companies but should strengthen the economic security function of the Office of National Security under the leadership of the presidential office, and through action plans and meetings, send a strong signal to the international community and market that it is closely monitoring the ‘LY Corp. incident’.”
