Japan rejected on Monday a proposal from South Korea to set up a dispute-resolution panel at the World Trade Organization over Tokyo's tightening of export controls on semiconductor materials, officials involved in the process said.
In a meeting of the WTO's Dispute Settlement Body, Japan argued that its export controls on South Korea-bound exports of three key materials used to manufacture semiconductors and display panels are allowed under WTO rules due to fears of diversion for military purposes.
Japan dismissed South Korea's claim that the measures are politically motivated, the officials said, adding that in the gathering the United States also supported Tokyo's rejection of a dispute panel on the issue. Washington maintains that the export controls have arisen from a national security concern and should not be subject to a ruling from the WTO.
But Japan's latest move may not be the final word in the row between the two Asian neighbors, as the panel will be set up anyway if South Korea proposes it again in the next DSB meeting on July 29.
If the panel is launched, experts on trade issues would look into the case and issue a ruling within six months on principle, although the process has tended to take longer recently.
In July last year, Japan placed tougher restrictions on exports of three key materials for South Korea.
The following month, Japan removed South Korea from a "white list" of countries given preferential trading status, citing concerns over Seoul's lax rules on exporting sensitive goods.
South Korea filed the WTO complaint in September, arguing the measures were a form of political retaliation, but suspended it in November after the countries agreed to start consultations on export controls.
Seoul has recently accused Japan of breaching its commitment by failing to ease the export controls despite the South Korean side having addressed Tokyo's concerns.
The bilateral relationship has been souring since South Korea's top court made a series of decisions ordering compensation for people ruled to have been forced to work in Japanese factories during the 1910-1945 period of Japan's colonial rule of the Korean Peninsula.
Japan argues the issue of compensation was settled for good by a 1965 bilateral agreement and has criticized the seizure of Japanese companies' assets in South Korea.