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The purpose of this paper was to explore the direction of development of trade between South Korea and Japan prior to the conclusion of the South Korea-Japan Free Trade Agreement (“FTA”). This study examined the volume of trade between South Korea and Japan and related characteristics, and derived empirical results using yearly data for 27 years from 1991 to 2017. According to the results of the analysis, the higher GDPs of South Korea and Japan as well as South Korean direct investments in Japan had positive (+) effects on the volumes of trade between South Korea and Japan. On the other hand, it was identified that Japanese direct investments in South Korea had negative (-) effects on the volumes of trade between South Korea and Japan. Furthermore, it could be seen that among the fields where Japanese invested in South Korea, the manufacturing and service industries have been on the rise in recent years, and the robust economic growth rates and the trend of expansion of mergers[1] and acquisitions of Japan led to increases in Japanese foreign direct investments, thereby affecting increases in investments in South Korea. Accordingly, it is expected that investments in various economic fields including gaming contents and information technology will become full-fledged hereafter. Therefore, in the case of the conclusion of the Korea-Japan FTA, it can be said that rather than focusing on speed, more rigorous verification is necessary for the provisions that may be concluded.

Empirical Analysis on the Current Status and the Development of Bilateral Trade according to the Promotion of Korea-Japan FTA