In 2019, a joint venture between a leading Japanese company and a top South Korean company resulted in the creation of LY Corp (Line Yahoo), a Tokyo-based joint venture between South Korea’s tech giant Naver and Japan’s SoftBank Group, showcased a rare moment of unity.

However, the fragile relationship between South Korea and Japan is under strain once again, as South Korean politicians accuse Tokyo of pressuring a South Korean company to sell its stake in Line, the do-it-all social media app.

Line started as a messaging app but is now used for everything from bill-paying to video-sharing dominating digital life in Japan.

Is Line Japanese or Korean?

Initially developed by Naver Japan, a subsidiary of South Korean tech giant Naver, Line has faced constant scrutiny over its country of origin since its inception in 2011. In its early stages, Naver Japan primarily employed Korean staff who were crucial in driving the platform’s success in Japan by using their technological expertise from South Korea.

To strengthen its position in Japan and mitigate controversies over its nationality, Naver partnered with Yahoo Japan in 2019, merging the business to create Line Yahoo (LY). This strategic collaboration aimed to expand Line’s reach and solidify its position in Japan, easing public and stakeholder concerns about the app’s nationality.

Trouble down the Line

The dispute between Japan and South Korea over the Line app began with concerns about how the app handles user data. Issues surrounding Line’s nationality resurfaced due to national security concerns following two major data breaches in 2021 and 2023.

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In 2021, it was revealed that Chinese engineers had accessed Japanese users’ data, including names, phone numbers, and email addresses. In 2023, a malware infection on a Naver Cloud server led to the leak of 510,000 items of personal data, prompting the Japanese Ministry of Internal Affairs and Communications to issue administrative guidance twice within a month. These breaches have heightened Japan’s worries, leading regulators to urge LY to reduce its dependence on Naver.

Pressure to reduce Naver’s stake

Amid the ongoing dispute, Line Yahoo’s CEO confirmed that the company has urged Naver to reduce its ownership stake in the platform. Naver, acknowledging its fault in the data breaches, has stated that it is exploring all possibilities, including selling its stake and engaging in discussions with SoftBank.

If Naver is forced to relinquish control over the business, it would be a scenario the company wishes to avoid. This move is a response to Japanese regulators’ concerns about data security and the app’s operational independence from the South Korean government.

Navigating future relations and data security

Japan and South Korea share a sensitive history. Despite significant strides in easing these historical tensions, the rift over the ownership of the Naver-SoftBank venture highlights the underlying issues in their relationship. Both countries must navigate these tensions carefully.

Moving forward, it is imperative to establish robust frameworks for data governance and international cooperation on cybersecurity to ensure the privacy and security of users globally. Strengthening these aspects will not only protect user data but also foster more stable and constructive relations between Japan and South Korea.