Towering above the long, gray boulevard that runs to the stone ramparts of Kyongbok Palace in the heart of Seoul is a statue of Adm. Yi Sun Sin, who is commemorated here for routing a Japanese invasion nearly 400 years ago.
The old warrior, a symbol of South Korean nationalism, continues to cast a shadow on the country's relations with Japan. Among the older generation there are bitter memories of the 36 years of Japanese colonial rule that ended in 1945. Younger South Koreans' sensitivities dwell on what they view as an economic relationship that vastly favors Japan.
What these perceptions add up to is an attitude here that Japan, South Korea's wealthy Asian neighbor, is shirking its responsibilities in backing away from Seoul's request for a huge increase in economic aid.
South Korea is asking for $6 billion in low-interest loans for economic development during the five years ending in 1986. Officials here argue that the funds would contribute to the stability of the region at a time when this industrializing country is forced to divert a large share of its own resources to its military budget.
Talks on the hotly debated issue, which entered a new stage in Seoul last week, are important because the outcome will help shape future ties between America's two key allies in Northeast Asia. They also reflect an ambitious bid by President Chun Doo Hwan and a tough, new breed of South Korean leaders to put relations on a more equal footing.
South Korean Foreign Minister Lho Sin Yong made the controversial proposal during talks in Tokyo last August with Sunao Sonoda, then Japan's foreign minister. Sonoda's flat refusal to entertain it triggered a dispute between the two countries.
What galled the Japanese, apart from the magnitude of the requested aid, was South Korea's claim that its heavy burden of military spending was, in effect, helping to underwrite the defense of Japan and entitled Seoul to nonmilitary compensation in the form of aid.
South Korea currently spends roughly 6 percent of its $58 billion gross national product on defense, while Japan, whose GNP is 20 times larger, spends 0.9 percent.
South Korea's argument raised an uproar in Japan, where officials asserted that the antiwar provisions of Japan's constitution ruled out economic assistance on the basis of military security considerations. Under strong pressure from the Reagan administration to boost defense spending, the Japanese widely suspected Washington's hand in prompting Seoul to press its claims.
Seoul since has stepped back from using the concept of military burden-sharing as a bargaining chip. In working-level talks earlier this month, South Korean officials made it clear that the loans would be earmarked for the construction of schools, hospitals, subway lines, dams and other nonmilitary projects under the government's newly announced five-year plan, according to a senior Foreign Ministry official in Tokyo.
The two-day session ended inconclusively, and officials on both sides privately conceded that they remain seriously at odds.
While few South Koreans expect Tokyo ultimately to provide the full $6 billion, officials in Seoul have insisted that Japan commit itself to a lump sum to cover the five years under discussion.
The Japanese contend that they will consider South Korean requests only one year at a time and only after Seoul has presented more detailed proposals for specific projects.
Senior Foreign Ministry officials in Tokyo suggested, however, that Japan may be willing to designate an overall amount, pending a closer study of Seoul's shopping list.
The two sides will attempt to thrash out their differences in further working-level talks with the aim, officials said, of settling the dispute at a meeting of the two countries' foreign ministers sometime this spring.
Failure to reach an agreement so far has set back a summit meeting between Chun and Japanese Prime Minister Zenko Suzuki, originally expected late last year, and hampered Suzuki's bid to give top priority to the improvement of relations with Japan's closest neighbor.
Tempers have cooled somewhat, but the issue continues to churn up strong emotions in both countries. One senior Japanese Foreign Ministry official said, "Over the next five years we will have $7.5 billion in economic assistance for all of Asia. What makes the Koreans think they are entitled to $6 billion?"
To the South Koreans it is quite simple. According to their statistics, the country has piled up nearly $22 billion in trade deficits with Japan since 1965, which, in their view, entitles them to considerably more than the roughly $83 million in economic assistance they now receive annually from Japan.
"It's not because we are hard up that we are asking Japan for this money," a senior South Korean official said. "But when Communist North Korea has a 2-to-1 military advantage . . . we have to spend a considerable portion of our resources on defense and sacrifice in the economic sector. We are not a Bangladesh asking Japan for a handout."
The United States currently fills the gap in military strength by maintaining a presence of about 40,000 troops in South Korea.
To be sure, Seoul could use the money. The economy, to which political fortunes in South Korea are closely tied, has now begun to reverse its steep decline in 1980. But with the country's industrial engine still sputtering, future domestic stability will depend, foreign economic analysts here said, on Chun's ability to keep economic growth on track.
Political relations between the two countries always have been fragile, especially following president Park Chung Hee's assassination in October 1979. But now South Korean leaders are insisting on a more equal and open relationship because of widespread complaints that postwar ties have been dominated by an "old boy" network of Japanese businessmen and politicians and their South Korean counterparts involving alleged profiteering. Chun has vowed to end what is referred to here as "back-door" dealing with Japan.
Observers here point out that Chun and many of the South Koreans in positions of influence in government and business today are products of a postwar system of education here that turned its back with a vengeance on the forced learning of Japanese language and customs during colonial days.
Among this new hangul (the name for Korea's native alphabet) generation are many individuals who, as college students or young bureaucrats or military officers, bitterly opposed restoration of postwar diplomatic ties with Japan in 1965.
Under that agreement, Japan paid South Korea $500 million in outright reparations and low-interest loans. But Kim Yoon Hwan, a prominent government party politician, now in his late 40s, said, "Many people felt that the money couldn't compensate for the years of forced labor, discrimination and expropriation of property under colonial rule."
Today, Japanese officials complain that the hangul types are less knowledgeable than their elders in dealing with Japan and have closer ties with the Americans.
Younger South Koreans tend to be more sensitive than their parents' generation about what they view as Japanese attitudes of superiority and Japan's attempts to dominate South Korea's economy.
Stories of alleged incidents of discrimination against the 630,000 Korean residents in Japan frequently capture newspaper headlines here and the planeloads of Japanese-sponsored groups that come to South Korea on regularly scheduled "sex tours" keep anti-Japanese sentiments here on the boil.
The Japanese, who, centuries ago, borrowed much of the high art and culture of the Asian continent through Korea, today tend to downplay the past.
Business leaders question the wisdom of providing large amounts of economic aid to South Korea as the country has mounted increasingly successful efforts to cut into key Japanese export markets in steel, shipbuilding, heavy construction and machinery.
Suzuki has attempted to set the stage for more amicable relations with South Korea. At a press conference last week he told reporters, "Our relations with South Korea are inseparable and . . . not only benefit our two countries, but are important for the peace and stability of Asia."
Nevertheless, officials in Tokyo suggested that a large package of economic aid for South Korea is likely to be difficult for the Suzuki administration to sell politically to a Japanese constituency among whom prejudicial attitudes toward Koreans are deeply rooted.
Meanwhile, one Japanese Korea-watcher observed, "Korea sees itself as a mentor with a long history of being dominated by a former disciple. The Koreans are not about to bow their heads to Japan."