The major business lobbies in Japan and South Korea said Thursday they will each establish a foundation to jointly tackle common issues, including energy, and promote youth exchanges, a move that could help repair bilateral relations, which soured over a wartime labor compensation dispute.

The announcement by the Japan Business Federation and the Federation of Korean Industries to launch their "future partnership" foundations came after South Korea last week announced a plan to settle the long-running dispute with Japan.

Japan Business Federation Chairman Masakazu Tokura (R) and Kim Byong Joon, acting chairman of the Federation of Korean Industries, are pictured at a press conference in Tokyo on March 16, 2023. (Kyodo)

The two groups are expected to contribute 100 million yen ($752,000) each to their respective foundations and will discuss the details on how to utilize the funds.

The foundations will also solicit funding from private companies, with the Japanese foundation open to contributions from Nippon Steel Corp. and Mitsubishi Heavy Industries Ltd., which were sued by the Korean plaintiffs who won lawsuits over their alleged forced labor during Japan's 1910-1945 colonial rule of the Korean Peninsula.

Under the plan, recently announced by Seoul, a South Korean government-backed foundation will pay compensation to plaintiffs instead of the Japanese companies that were sued.

The business lobbies said they will also conduct research and undertake projects in areas such as energy security and decarbonization, as well as dealing with aging societies and geopolitical risks, bearing in mind the regional security situations involving China and North Korea.

"It is a big step forward to improve bilateral relations. We will make sure to pave the way to building a future-oriented partnership," said Masakazu Tokura, chairman of Japan's largest business lobby also known as Keidanren.

The business lobbies also plan to make it easier for South Korean students to find jobs and internships at Japanese companies.

The announcement by the business groups also coincided with South Korean President Yoon Suk Yeol's visit to Japan for talks with Prime Minister Fumio Kishida.

An improvement in bilateral relations is also expected to increase trade between the two countries.

The Japanese government separately said Thursday it will lift export controls of key chip materials against South Korea. The controls have been in place since 2019.

South Korea has a competitive advantage in the global semiconductor market, with Samsung Electronics Co. and SK Hynix Inc. among the leading chipmakers. Japan, for its part, has a large global market share in chip materials.

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