Trade volume between Korea and Japan has dropped to its lowest level this year since 2009, totaling 43-billion U.S. dollars in the first half.
Korea's exports to Japan, ranging from smartphones and semi-conductors to steel, dropped more than 5-percent from the same period last year.
The same goes for imports from Japan, which was reduced by more than 12-percent.
The Korea International Trade Association attributes the overall drop in trade between the two countries to Japan's attempt to reduce its amount of imports in order to increase domestic demand.
"The Japanese government raised its consumption taxes in April and is increasingly trying to nationalize its component and material industry after they were severely damaged by an earthquake disaster in March 2011."
Although Korea's trade deficit to Japan is shrinking the researcher said the effect may not be entirely positive since it's a result from a decrease in Korea's imports rather than an increase to its exports.
He adds that the trade volume between the two could drop even further as Korea is increasingly diversifying trade with other emerging economies.
It's also being fueled by the low price competitiveness of Korean products to that of Japan's as the value of the Korean won continues to strengthen against the weakening Japanese yen.
Kim Ji-yeon, Arirang News.