U.S. Secretary of State Mike Pompeo, South Korean Foreign Minister Kang Kyung-wha and Japanese Foreign Minister Taro Kono hold a joint press conference in 2018 in Seoul, South Korea. Chung Sung-Jun/Getty Images

What is the intelligence agreement?

The General Security of Military Information Agreement, more commonly referred to as GSOMIA, allowed the two countries to directly share information on North Korea's nuclear and missile activities, ensuring that the two U.S. allies are aligned defensively. The agreement is the first intelligence-sharing agreement between the two nations since Korea's liberation from Imperial Japan in 1945.

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In 2011, Seoul, Tokyo and Washington began regional security negotiations focused on Pyongyang's nuclear threats. The deal was formalized in 2016. "GSOMIA was first supposed to be signed back in 2012 but got delayed from the South Korean side because the locals were against the idea of having an agreement with the Japanese," said Waqas Adenwala, Asia analyst at research firm Economist Intelligence Unit.

'Perplexing move'

Seoul's plan to withdraw from the initiative is probably also driven by such "domestic opposition," Adenwala said. If Seoul follows through on its threat, South Korea will probably share information with Japan the way it did before GSOMIA was signed — through Washington. That will "create lags" and reduce the effectiveness of the allies' ability to watch North Korea, Adenwala told CNBC earlier this week. Troy Stangarone, senior director at the Washington-based Korean Economic Institute, said that South Korean President Moon Jae-in's decision "is a perplexing move," because he appeared to be offering "an olive branch" to Japan just days before.

Withdrawing from the intelligence sharing deal means that Seoul will no longer receive quick notification on irregular activities in regional waters — in what Japan calls the Sea of Japan, but which Korea refers to as the East Sea — according to South Korean government sponsored broadcaster Arirang News. In 2019 alone, Seoul and Tokyo exchanged "classified military information about North Korea 7 times," according to the government-backed broadcaster.

History of animosity