South Korea announced its solution to a wartime labor compensation dispute with Japan on Monday as momentum builds on both sides toward mending bilateral ties that have soured over the long-standing issue.

The solution centers on a government-backed South Korean foundation paying compensation to Korean plaintiffs instead of requiring two Japanese firms to do so as South Korean court rulings had ordered.

The moves reflect an eagerness on the part of President Yoon Suk Yeol, who took office in May last year, to improve relations with Japan amid heightened missile threats from North Korea, as well as calls for better ties from South Korean businesses.

Yoon was quoted as saying, "The announcement of a solution for the forced labor ruling amid difficulties is a decision to step into a future-oriented relationship with Japan."

South Korean Foreign Minister Park Jin holds a press conference at the ministry in Seoul on March 6, 2023, announcing South Korea's solution to a wartime labor compensation dispute with Japan. (Pool photo)(Kyodo)

"For South Korea-Japan ties to enter a new era, both governments should strive for future generations to play the main role," Yoon said, according to presidential office spokesperson Lee Do Woon.

South Korean Foreign Minister Park Jin told a press conference he hopes to develop "future-oriented relations" with Japan, based on the two nations' joint declaration in 1998, saying that ties should not remain "stalled" any longer.

It remains unclear, however, whether the plan will finally resolve the dispute and head off a domestic backlash, with opposition parties and supporters of former Korean laborers demanding the Japanese side offer a fresh apology and compensate plaintiffs.

Lee Jae Myung, a representative of the liberal Democratic Party, called the solution a "secondary victimization" for the South Korean plaintiffs, who have been asking for a sincere apology and compensation from Japan.

"It looks like the Yoon Suk Yeol administration decided to choose the way of betraying the righteousness of history," Lee said earlier in the day.

A civic group that supports the plaintiffs in Seoul held a press conference after the solution was announced and harshly criticized the government's decision.

"The government's solution to forced mobilization announced today effectively neutralizes the 2018 Supreme Court ruling that recognized the illegality of colonial rule and liability for anti-humanitarian illegal activities by war criminal companies," the group said, adding that the administration is forcing victims to make sacrifices again and trampling on their human rights and dignity.

The Japanese government welcomed the announcement and said it stands by past government statements that expressed remorse over Japan's wartime aggression in Asia.

To accommodate Seoul's request for a voluntary "sincere response," Tokyo will allow Japanese firms to donate to the South Korean foundation.

Park said he expects the Japanese government to make a "comprehensive apology" and for Japanese businesses to make a "voluntary contribution" to the foundation.

In response to the South Korean solution announced Monday, the Japanese government plans to lift restrictions on semiconductor material exports to South Korea imposed in July 2019 and to return the country to a "white list" of trusted trading partners that receive preferential treatment.

In separate rulings in 2018, South Korea's Supreme Court ordered machine manufacturer Mitsubishi Heavy Industries Ltd. and steelmaker Nippon Steel Corp. to pay damages to former Korean laborers and their relatives over forced labor during World War II.

But the two companies refused to comply as the Japanese government has said all issues that stemmed from Japan's 1910-1945 colonization of the Korean Peninsula were settled "completely and finally" under a 1965 bilateral agreement.

The plaintiffs moved to liquidate the Japanese companies' seized assets in South Korea to attain compensation, and decisions by South Korean courts in 2021 ordering their sale heightened concerns in Tokyo over the repercussions and propelled Seoul to look for an alternative solution before the sale took place.

The latest development comes as relations between the two neighbors have shown signs of improvement since Yoon replaced Moon Jae In while pledging to take a future-oriented approach toward Japan.

U.S. President Joe Biden welcomed Monday's announcement, saying South Korea and Japan marked "a groundbreaking new chapter of cooperation and partnership between two of the United States' closest allies."

"As we move ahead, I look forward to continuing to strengthen and enhance the trilateral ties between the Republic of Korea, Japan, and the United States," Biden added.

Under the left-leaning Moon, the bilateral relationship had reached its lowest point in years over wartime labor and a raft of other issues, including trade policy.

The current conservative president has also adopted a hard-line stance on North Korea, which has repeatedly tested ballistic missiles and is believed to be preparing for a seventh nuclear test that would be the first since September 2017.

In November last year, Kishida and Yoon met in the Cambodian capital Phnom Penh in the first official summit between the two countries since December 2019, agreeing to cooperate toward an "early settlement" of the wartime labor issue.

The following is a list of recent events related to relations between Japan and South Korea.

Oct. 30, 2018 -- South Korea's Supreme Court orders steelmaker Nippon Steel Corp. to compensate Korean plaintiffs for forced labor during Japan's 1910-1945 colonial rule of the Korean Peninsula. The court issues a similar ruling to machinery manufacturer Mitsubishi Heavy Industries Ltd. on Nov. 29.

Nov. 21 -- South Korea announces dissolution of a foundation created under a 2015 bilateral agreement that distributed Japanese money to Korean women forced to work in Japanese military brothels during World War II as well as their relatives.

Dec. 21 -- Japan says a South Korean destroyer locked its fire-control radar on a Japanese defense force patrol plane over the Sea of Japan. South Korea denies the accusation.

July 4, 2019 -- Japan tightens the control of exports to South Korea of three materials used for the production of semiconductors and display screens for smartphones.

Aug. 2 -- Japan decides to revoke South Korea's preferential status as a trade partner for the purchase of goods that can be diverted for military use.

Aug. 22 -- South Korea says it has decided to scrap the General Security of Military Information Agreement, an intelligence-sharing pact called GSOMIA, with Japan. The decision is retracted later.

Sept. 27, 2021 -- A South Korean district court orders sale of local assets seized from Mitsubishi Heavy after the company refused to pay damages as ordered. A similar decision on Nippon Steel assets comes on Dec. 30.

May 10, 2022 -- Yoon Suk Yeol becomes South Korean president, replacing Moon Jae In.

Nov. 13 -- Japanese Prime Minister Fumio Kishida and Yoon meet in Cambodia, the first official summit between the two countries since December 2019, agreeing to work for an "early settlement" of the wartime labor issue.

Jan. 12, 2023 -- South Korea, during a public hearing, unveils a plan centered on a government-backed foundation paying equivalent money to plaintiffs as the most likely solution.

March 6 -- South Korea announces it will implement the solution to the wartime labor dispute.

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