South Korea said Wednesday it is open to bilateral talks with the Japanese government over wartime labor compensation if both Japanese and South Korean firms would be involved in a financing scheme.

The dispute over compensation has frayed ties between the two countries following South Korean court decisions ordering Japanese companies to compensate victims of forced labor during Japan's colonial rule of the Korean Peninsula from 1910 through the end of World War II in 1945.

A senior Japanese Foreign Ministry official on the same day rejected the South Korean overtures, not just on the idea of a financing scheme involving both Japanese and South Korean firms but also on the grounds that Japan has moved on from seeking bilateral talks on the matter.

(Plaintiffs in lawsuits filed against Japanese firms over wartime labor and their lawyers attend a press conference in Gwangju, South Korea, on April 29, 2019.)

After the court decisions, Japan had been seeking bilateral talks with South Korea from January in a bid to resolve the matter diplomatically.

But in the absence of a concrete response from South Korea, Japan on May 20 called for the start of an arbitration process under the terms of a 1965 bilateral accord.

While Japan takes the position that the issue of compensation was settled by the 1965 accord, under which it provided South Korea with $500 million in "economic cooperation," the South Korean Supreme Court ruled in October that the accord did not terminate the right of individuals to claim damages.

With the Japanese firms refusing to compensate the plaintiffs despite court decisions against them, the plaintiffs' lawyers have pushed ahead with plans to seize and liquidate the companies' assets.

Wednesday's proposal, which envisions not just Japanese firms but South Korean companies helping compensate the Korean plaintiffs, has not been discussed with the companies affected, but the South Korean government expects them to participate in the scheme voluntarily, a South Korean Foreign Ministry official said.

The official added that the plan is the best one conceivable as the plaintiffs are advanced in age and cannot wait much longer, and as reconciliation is better than forcibly executing a compensation process.

The South Korean move comes as calls are increasing among Japanese officials and lawmakers for Prime Minister Shinzo Abe not to hold talks with South Korean President Moon Jae In on the sidelines of the Group of 20 summit in Osaka next week.

Often marred by differing views of wartime history and a territorial row, bilateral relations have become especially fraught in recent months due to the wartime labor issue as well as an incident where a South Korean destroyer allegedly locked its fire-control radar onto a Japanese patrol plane in Japan's exclusive economic zone.

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