Japan's Defense Ministry has decided not to invite Korea to a fleet review in October, the Yomiuri Shimbun reported Wednesday.

Japan plans to invite other allies, including the U.S., Australia and India, as well as China, which is locked in a territorial dispute with Japan, to the fleet review on Oct. 14 in Sagami Bay near Tokyo.

For the last fleet review in Japan in 2015, Korea sent a Daejoyoung destroyer.

The decision is expected to exacerbate already icy bilateral relations. The leaders of Korea and Japan have no plans to meet each other at the upcoming G20 Summit in Osaka.

The main bone of contention is a ruling by Korea's Supreme Court earlier this year ordering Japanese businesses to compensate Korean victims of forced labor during World War II. Japan insists that all compensation claims were settled under a 1965 lump sum payment.

There are now concerns that the spat could prompt Japan to scrap an intelligence-sharing agreement with Korea that is up for review in August.

Businesses in both countries also fear the impact of deteriorating relations. Kim Yoon, chairman of the Korea Japan Economic Association, said in a seminar in Seoul on Wednesday, "Both governments need to listen to the concerns of the business community to prevent the situation from getting worse."

