Japan, South Korea raise the stakes in dispute over forced labor

TOKYO/SEOUL (Reuters) – Japan and South Korea raised the stakes on Tuesday in a diplomatic dispute that threatens to disrupt global supplies of smartphones and chips, with South Korea denouncing Japanese reports that it had transferred a key chemical to North Korea.

At the root of the dispute between the U.S. allies is compensation for South Koreans forced to work for Japanese firms during World War Two.

It worsened last week when Japan said it would tighten curbs on exports of three materials crucial for advanced consumer electronics because trust with South Korea had been broken over the forced labor dispute.

The restrictions on exports of the material to South Korea could hit tech giants, such as Samsung Electronics (005930.KS) and SK Hynix (000660.KS), which supply chips to the likes of Apple (AAPL.O) and Huawei

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