“Ito Hirobumi: Invasion of Korean territory, Ito Hirobumi's grandson: Invasion of the cyber territory line of the Republic of Korea”
President Lee Jae-myung noted in a social media post last May, during his time as leader of the Democratic Party of Korea, that Matsumoto Takeaki, a former Japanese Minister of Internal Affairs who ignited the so-called "Line Yahoo incident," is a descendant of Ito Hirobumi, the first governor-general of Korea, and strongly criticized the government’s response.
On the 9th, according to the IT industry, concerns have been raised that Line Yahoo may emerge as a factor of management uncertainty alongside the launch of the Lee Jae-myung government. Although the system separation between Naver and Line Yahoo has already been completed at the request of the Japanese government, if pressures such as equity sales arise in the future, it could escalate into diplomatic issues.
◇ Democratic Party criticizes "subservient diplomacy" during Line Yahoo incident
The Line Yahoo incident began when approximately 520,000 personal data were leaked from Japan's national messenger "Line" server due to the inflow of malware through a PC of a Naver Cloud partner in November 2023. Following this, the Japanese Ministry of Internal Affairs, through two administrative directives in March and April last year, demanded "the sale of Naver's equity in Line Yahoo," leading to a controversy over management rights in Korea. The situation escalated into diplomatic conflicts, being discussed at the summit between the two countries in May last year, and two months later, the Japanese Ministry of Internal Affairs withdrew its demand for "review of equity relations." The situation was contained at a level where Line Yahoo was operating independently separated from the servers and networks it had relied on from Naver and Naver Cloud. Naver Cloud is a subsidiary of Naver.
At that time, the Democratic Party of Korea criticized the Yoon Suk-yeol government's response as "subservient diplomacy." Fifty-seven Democratic Party lawmakers proposed a resolution in June last year, claiming that "the pressure on Naver's Line equity is an invasion of the economic territory of the Republic of Korea." After the Line Yahoo incident was settled, during the plenary meeting of the Special Committee on Budget & Accounts in September last year, they claimed, "We handed over Line, a company that our country raised, to Japan."
There are strong evaluations within President Lee Jae-myung and the ruling party that the Line Yahoo incident is still perceived as a "diplomatic disaster."
Ahn Jung-sang, an adjunct professor at Chung-Ang University Graduate School of Communication (former chief expert on information and communication and broadcasting media for the Democratic Party of Korea), said, "The Japanese Ministry of Internal Affairs has already implemented all the personal information protection measures it requested, so the likelihood of immediate issues arising is low," but added, "Japan is a country with strong nationalist tendencies and is very sensitive to its national interests, and the conflict is still present as Line Yahoo retains its technical leadership, which Naver controls."
He further analyzed, "If the Japanese government raises the issue of equity in Line Yahoo again through external pressure, there is a possibility that it will escalate into a diplomatic issue."
◇ Received a settlement of 60 billion won after contract termination… System separation virtually complete
The problem is that the "system separation" between Naver and Line Yahoo has progressed significantly and is difficult to revert. Until the incident of personal data leakage from Line occurred, Line Yahoo had relied on Naver and Naver Cloud for system operations. According to the demand for "prevention of recurrence of infringement incidents" from the Japanese Ministry of Internal Affairs, in March, Line Yahoo completely blocked connections related to systems, certifications, and networks with Naver and Naver Cloud. The security operations and entrusted management system were also independently reorganized. Full separation, including overseas subsidiaries of Line Yahoo, is currently being gradually arranged with a target completion by March next year. This means that factors blocking Naver's technical involvement in Line Yahoo's operations have been eliminated.
In this process, Naver received a settlement of approximately 60 billion won from Line Yahoo due to the termination of the service contract. According to Naver's disclosure of the status of large corporate groups, last year's sales related to Line Yahoo were recorded at 79.225 billion won. Naver also earned 1 billion won from the Japanese operational corporation of the work collaboration tool "Naver Works" by 2023, but this item was excluded last year.
Naver Cloud recorded sales of 48.591 billion won from Line Yahoo last year, a reduction of 32.7% compared to the previous year (72.246 billion won). Sales related to the simple payment service Line Pay operated by Line Yahoo were 294 million won last year, which is not significantly different from the previous year (300 million won), but the current state is that no additional profits can be expected. This is because all Japanese services of Line Pay were terminated last April and integrated with Yahoo Japan's "PayPay."
◇ No change in Naver's equity even after the Line Yahoo incident
Naver launched "Line" through its Japanese corporation NHN Japan in 2011. Line has now grown into a national messenger app with approximately 97 million users in Japan.
In 2019, Naver decided to "integrate the management of Line and Yahoo Japan" in consultation with SoftBank, which operates Yahoo Japan, the largest portal in Japan. Naver and SoftBank established a joint holding company, A Holdings, in 2021, each holding 50% equity, and created a structure for operating the joint venture Line Yahoo (then Z Holdings) under A Holdings. The current equity ownership of Line Yahoo by A Holdings is 62.5%. This structure remains unchanged even after experiencing the Line Yahoo incident.
Though in terms of equity, Naver and SoftBank share management control of Line Yahoo, SoftBank is responsible for the actual operations. The influence of Naver was further reduced when Shin Joong-ho, the only Korean board member of Line Yahoo, resigned from the internal board in May last year. The current Line Yahoo board is entirely composed of Japanese members.
Professor Kim Yong-hee of Sun Moon University stated, "If movements related to Line Yahoo emerge in Japan, the Lee Jae-myung government is likely to respond differently from the previous government, utilizing strong diplomatic rhetoric or attempting to resolve it through diplomatic mechanisms."