South Korea has said it will take Japan off its favoured trade partners’ list.
The move is a tit-for-tat response to Japan’s decision earlier this month to do the same to South Korea, says BBC.
Industry Minister Sung Yun-mo said Japan would be placed on a newly created restrictive trade list instead.
Long-running bilateral tensions were inflamed last year by South Korean court rulings ordering Japanese firms to pay compensation to Koreans over forced labour during World War Two.
The legal decisions drew condemnation from Japan, which argues the dispute was settled in 1965 when diplomatic ties were normalised between the neighbouring countries.