It is necessary to investigate the paradigm shift caused by reduced differences in the competitiveness between Korea and Japan. Due to fast growth of Korean companies, their cooperative relationship has changed from a vertical relationship to a horizontal partnership in supply chain restructuring, strategic alliance, technical standards, co-investment in resources and infrastructures in the third countries.The Great Japan Earthquake (2011) provides a chance to reconsider Japan as Korea’s supply base of components, materials and capital goods. It raises the necessity of looking back at higher dependency on Japan and looking up to the future industrial partnership between Korea and Japan.As the new government has been launched in Korea, it is essential to thoroughly review the past status of Korea-Japan industrial cooperation and establish government policy for a desirable industrial partnership between two countries. There is a possibility to change the past Korea-Japan industrial relationship through weakness of the yen derived by Abenomics. It is necessary to prepare for the change.This article reviews the paradigm shift in competitiveness and the cooperative relationship between Korea and Japan after the global financial crisis and the Great Japan Earthquake (2011) in the fields of trade and investment, and it suggests future ways of achieving strategic partnerships in terms of government policy.This article consists of six parts; Part 1 is the introduction. Part 2 is an analysis on the paradigm shift of industrial cooperation in terms of trade focusing specialization structure between Korea and Japan. Part 3 is an analysis of the industrial cooperative relationship and paradigm shift in perspective of the Global value Chain (GVC). Specifically, this part discusses the necessity and significance of GVC analysis, GVC research methodology and analyzes the Korea-Japan GVC, intermediate goods trade, value-added trade, its competitiveness, and the GVC paradigm shift. Part 4 is an analysis of Japanese manufacturing changes and investment in the Korean market. Part 5 summarizes the results of previous analysis and their implications, and also suggests the future direction of strategies and government policy issues to expand Korea-Japan industrial cooperative relationships.In this report, we adopted various academic research methodology tools with a database consisting of various trade statistics (UN Comtrade, Korea trade statistics, Materials and components statistics, etc.), the World Input-Output database, interviews and literature surveys
