South Korea and Japan have reached a landmark agreement on the thorny issue of wartime sex slaves, known as comfort women, that has long strained relations.

The deal would be "final and irreversible" if Japan fulfils its responsibilities, Foreign Minister Yun Byung-Se told reporters after talks with his Japanese counterpart Fumio Kishida.

Mr Kishida said Japan agreed to offer one billion yen ($11.4 million) in state compensation for comfort women, who were sexually enslaved by Japanese troops during World War II.

"It's not compensation. It's a project to recover the honour and dignity of all comfort women and to heal their emotional wounds," Mr Kishida said.

"The comfort women issue ... occurred with the involvement of the Japanese military ... and the Japanese Government acutely feels its responsibility."

Japanese Prime Minister Shinzo Abe expresses an "apology and repentance from the bottom of his heart" to the victims, Mr Kishida said.

Under the agreement, Seoul will try to relocate a statue symbolising comfort women, which currently stands in front of the Japanese embassy, through consultations with relevant NGOs, Mr Byung-Se said.

Tokyo has given priority to relocating the statue, seen as an embarrassing eyesore and an insult to Japan.

A controversial statue of a comfort woman will be moved from outside the Japanese embassy in Seoul as part of the deal. ( ABC )

"I am very pleased to declare the successful conclusion of the difficult negotiations before the year is out, the 50th anniversary of diplomatic ties," Mr Byung-Se said.

Mr Kishida said that with Monday's agreement, relations between Japan and South Korea would develop into "a future-oriented new era".

He said the deal "will not only benefit our country but also largely contribute to the region's peace and stability".

Up to 200,000 women, many of them Korean, are estimated to have been sexually enslaved by Japan during World War II.

Seoul and Tokyo have been tussling over the wording of an agreement to settle the issue.

In a speech in August, Mr Abe expressed his "utmost grief" for World War II, but said future generations should not have to continue saying sorry.

"Prime Minister Abe, as the prime minister of Japan, once again expresses his feeling of heartfelt apology and remorse to all those who, as comfort women, experienced much suffering and incurred incurable psychological and physical wounds," Mr Kishida told reporters.

The Jiji news agency reported that Prime Minister Shinzo Abe and South Korean President Park Geun-hye will speak by telephone to discuss the agreement.

AFP/Reuters