Japan and South Korea on Monday moved to resolve a wartime labor row that had led bilateral ties to sink to the lowest point in decades, with Seoul offering to compensate former Korean laborers without requiring direct payments from Japanese companies.

The development will be accompanied with steps to address other pending bilateral issues, such as in trade, marking a turnaround in bilateral relations at a time when cooperation between the two neighboring countries is considered vital in facing North Korean nuclear and missile threats, as well as an assertive China.

Under the plan, a South Korean government-backed foundation will pay compensation to Korean plaintiffs who won lawsuits over alleged forced labor during Japan's 1910-1945 colonial rule of the Korean Peninsula, instead of the Japanese companies that were sued.

The Japanese government, in response, said it will uphold past statements that expressed remorse over the colonization, and said it will start a process toward lifting restrictions on semiconductor material exports.

Japanese Prime Minister Fumio Kishida hailed the plan put forward by South Korea, saying it will help to restore "healthy ties" between Tokyo and Seoul, describing the neighbor as an "important partner."

Japanese Prime Minister Fumio Kishida speaks to reporters at the Diet in Tokyo on March 6, 2023. (Kyodo)

Japan has been keen to "further bolster" its "strategic partnership" with Seoul to better grapple with international challenges, such as the growing military threat from North Korea, Kishida told a parliamentary session.

Efforts to mend ties have accelerated under South Korean President Yoon Suk Yeol, who took office last year. He has favored stronger ties with the United States and has been eager to improve ties with Japan.

"The announcement of a solution for the forced labor ruling amid difficulties is a decision to step into a future-oriented relationship with Japan," Yoon said, according to the presidential office.

U.S. President Joe Biden also welcomed the announcements as opening "a groundbreaking new chapter of cooperation and partnership between two of the United States' closest allies."

According to a diplomatic source, the Japanese and South Korean governments are now planning a visit by Yoon to Japan later this month, possibly on March 16 and 17, for talks with Kishida.

South Korean President Yoon Suk Yeol. (Yonhap/Kyodo)

South Korean Foreign Minister Park Jin told a press conference that the bilateral ties should not remain "stalled" any longer and that it seeks to develop the relationship to a "higher level."

But it remains unclear whether the latest development will bring a complete end to the labor dispute, with South Korean opposition parties and supporters of former Korean laborers demanding the Japanese side offer a fresh apology and compensates plaintiffs.

According to the South Korean government, the foundation will collect donations from the South Korean private sector and make payments to the plaintiffs involved in South Korean top court rulings in 2018 that ordered two Japanese companies -- Mitsubishi Heavy Industries Ltd. and Nippon Steel Corp. -- to compensate them.

The foundation also plans to pay damages to other plaintiffs who win pending cases.

The two Japanese companies have refused to comply with the South Korean top court rulings, as the Japanese government has maintained that all issues stemming from its colonization of the Korean Peninsula were settled under a bilateral agreement signed in 1965.

The two Japanese firms said in separate statements that they maintain their position that the compensation issue has already been resolved under the 1965 accord.

While noting that Japanese companies' contribution to the foundation is not a prerequisite under South Korea's plan, Japanese Foreign Minister Yoshimasa Hayashi suggested that Japanese firms can make donations to the entity if they voluntarily want to do so.

Hayashi also said the South Korean proposal is expected to help expand political, economic and cultural exchanges between the two Asian countries.

In a related move, the Japanese government said the same day it will start talks with Seoul on lifting its controls on semiconductor exports that were imposed in 2019 amid a deepening rift over wartime labor.

South Korea, for its part, notified Japan it will suspend a dispute process at the World Trade Organization over the controls.

Other possible moves to showcase their improvement of their ties may include an agreement on the resumption of reciprocal visits by the countries' leaders, a practice that has stalled since 2011.

Tokyo-Seoul ties have often been marred by territorial disputes and wartime history, including the issue of Koreans who were forced to work as "comfort women" in Japan's military brothels.

Kishida said during the parliamentary session that the government will stand by its apology to South Korea for past aggressions.

"We have taken over the position articulated by previous Cabinets on the view of history and will continue to do so," he said.

In 1995, on the 50th anniversary of Japan's surrender in World War II, then Prime Minister Tomiichi Murayama issued a statement that has been mentioned by successive Cabinets as the government's basic stance.

Murayama said Japan "caused tremendous damage and suffering to the people of many countries, particularly to those of Asian nations" through its colonial rule and aggression, stating his "feelings of deep remorse" and "heartfelt apology."

A 1998 declaration made by then Japanese Prime Minister Keizo Obuchi and then South Korean President Kim Dae Jung contained a similar expression.

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