ㅇ Despite the strong foundation of economic and trade relations between Korea and Japan, there exists a disproportionate imbalance in trade on the side of Korea. In fact, Korea's trade deficit against Japan has been continuously growing since the diplomatic normalization of the two countries in 1965, because Korea's economic development and industrial structure is heavily dependent upon trade with Japan.

 - The bilateral trade volume between the two countries reached US$72.4 billion in 2005; Korea's trade 
deficit with Japan amounted to US$24.4 billion.

ㅇ One of the fundamental causes of Korea's ongoing trade deficit with Japan is the reliance of Korea's 
industrial structure on imports of capital goods from Japan, which accounts for more than 50 percent of 
Korea's total imports from Japan. This type of industrial structure was established during the period of 
Korea's economic development through industrialization. The majority of the deficit can be attributed 
especially to imports of core parts and materials from Japan, including machinery and electronic 
components. 

ㅇ A fundamental solution to Korea's existing chronic trade deficit with Japan would be for Korea to foster 
industrial technology and strengthen the competitiveness of its products in order to reduce its dependence 
on Japan as a major source of imports. At the same time, Korea needs to improve their business 
environment to attract more investment from Japan and expand industrial technology cooperation with 
Japan, which will in turn lead to a reduction of Korea's dependence on imports of capital goods from 
Japan.