KYODO NEWS - Aug 2, 2019 - 01:14 | World, All

Japan is set to revoke South Korea's preferential status as a trusted trade partner, Japanese government sources said Thursday, a move that is certain to add fuel to a bitter diplomatic row between the neighbors.

The Cabinet of Prime Minister Shinzo Abe will approve Friday the removal of South Korea from a "white list" of 27 countries able to buy Japanese products that could be diverted for military use, the sources said on condition of anonymity, after the countries' foreign ministers failed to find common ground in a highly charged meeting.

The United States, concerned that the growing enmity between its two largest Asian allies will hurt their ability to deal with missile threats from North Korea, had been urging them to resolve their differences.

But in their meeting on Thursday on the sidelines of annual ASEAN-related meetings in Bangkok, Japanese Foreign Minister Taro Kono and his South Korean counterpart Kang Kyung Wha came no closer to resolving the spat.

Kang told reporters she urged Tokyo to reconsider its tightening of export restrictions on South Korea, which Seoul has strongly criticized as going against rules established by the World Trade Organization.

The removal from the white list, which is expected to take effect later this month, could hurt South Korea's world-leading tech industry, already under pressure from Japan's decision to require from July 4 individual licenses to export to South Korea key materials used to manufacture semiconductors and display panels for smartphones and TVs.

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South Korea had previously been exempt from the process, which can take about 90 days.

The export restrictions have come as bilateral ties were frayed by South Korean court decisions ordering compensation for victims of forced labor during Japan's colonial rule of the Korean Peninsula from 1910 to 1945.

Japan says the court rulings last year violate international law because the issue of compensation was settled by a 1965 agreement under which it provided South Korea with $500 million in financial aid.

Kono said that in the roughly one-hour meeting with Kang, he urged South Korea to take corrective action and prevent the court rulings from hurting Japanese companies.

"I made it clear that the labor issue is extremely serious and is undermining the legal basis of Japan-South Korea relations," he told reporters after attending a gala dinner.

There were no smiles at the outset of the meeting and the two silently shook hands before reporters were ushered out of the room. It was their first face-to-face meeting since they spoke briefly in late June on the sidelines of the Group of 20 summit in Osaka.

Despite the frayed relations between the neighboring countries, which arguably have sunk to the lowest point since ties were normalized in 1965, the two ministers agreed to work closely together on efforts to denuclearize North Korea, a Japanese official said.

U.S. Secretary of State Mike Pompeo, who will join the two for a three-way meeting on Friday, is expected to play the role of mediator. He told reporters that he will encourage Japan and South Korea to "find a way to move forward together," though Kono said Tokyo has not received a direct offer to mediate.

Washington is particularly concerned about a deadline later this month for the countries to decide whether to renew a bilateral intelligence-sharing agreement that helps them counter missile threats from the North.

The General Security of Military Information Agreement, or GSOMIA, is automatically renewed every year unless either side voices its intent to rescind the accord.

Kang said she warned Kono that if Japan goes through with removing South Korea from the white list, Seoul would have no choice but to reconsider its security cooperation with Tokyo.

Kono, however, told reporters that the issues were completely unrelated, and that he was confident Seoul would "not confuse the two."

Foreign ministers from the 10-member Association of Southeast Asian Nations are holding a series of meetings in the Thai capital where they will speak with counterparts from "dialogue partners" such as Japan and the United States.