Mitsubishi Heavy Industries Ltd. and Nippon Steel Corp. said Monday they respect the Japanese government's view that a wartime compensation dispute with South Korea has already been resolved in a 1965 agreement after Seoul announced a plan to settle the issue.

South Korea said a government-backed foundation will pay compensation to Korean plaintiffs who sued the two companies alleging forced labor during World War II instead of requiring the two Japanese firms to do so as ordered by South Korean court rulings.

In its rulings in 2018, South Korea's Supreme Court ordered the companies to pay damages to former Korean laborers and their relatives.

The two firms have refused to comply with the orders as the Japanese government has maintained that all issues stemming from the country's 1910-1945 colonization of the Korean Peninsula were settled under a bilateral agreement signed in 1965.

"We understand that the issue of former Korean laborers had already been resolved completely and conclusively" in the 1965 agreement, Mitsubishi Heavy said in a statement, adding it is not in a position to comment on South Korea's announcement.

Nippon Steel also said in a statement there is no change to its view that the issue has been resolved under the 1965 accord.

Kazuo Tokura, chairman of the country's biggest business lobby, the Japan Business Federation known as Keidanren, said in a press conference that he welcomes the Japanese government's expression of hope that South Korea's solutions to the wartime labor feud can improve bilateral relations.

South Korean media have reported that the federation and its South Korean counterpart are considering setting up a fund to promote youth exchanges.

Tokura said he wants to "consider what kind of collaboration is possible on various fronts" in the near future.

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South Korea announces solution to wartime labor row with Japan