"We can't rule out the possibility that the situation would be prolonged, despite our diplomatic efforts to resolve the issue", President Moon Jae-in said at a meeting with executives from South Korea's top 30 conglomerates. Japanese companies exporting those goods need government approval to move them.
Seoul has raised the issue of Japan removing South Korea from the list of countries that receive preferential treatment in importing fluorine polyimide, resist and etching gas.
Meanwhile, Junichi Ihara, Japan's ambassador at the country's permanent mission to worldwide organizations in Geneva, stressed at the meeting that the Japanese measure does not amount to a trade embargo and is fully in accordance with WTO rules, noting that it represents an operational review needed to ensure the appropriate implementation of the country's export regulations, according to informed sources.
South Korea's Democratic Party said in a statement on Thursday it would include up to 300 billion won ($254.8 million) in an extra budget to cope with Japan's export limits on high-tech materials.
Chief Cabinet Secretary Yoshihide Suga said South Korea had asked Japan for an explanation of the curbs and that working-level officials would respond.
Samsung Electronics is the world's largest memory semiconductor maker, with its chips accounting for some 20% of South Korean exports.More news: Elderly S. Korean defects to N. Korea
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The Japanese prime minister said Sunday on a Japanese television program South Korea "may claim it is regulating trade in compliance with North Korea sanctions" but just as "Seoul is not abiding by global commitments on the wartime labor issue", it is likely "not regulating trade" in accordance with sanctions.
Japan has cited an "inappropriate case" in adopting the tougher export rules, with Prime Minister Shinzo Abe indicating a connection with sanctions imposed on North Korea over its nuclear weapons and missile development programs.
Tokyo has also said the bilateral relationship of trust has been "significantly undermined", while rejecting the charge that the measure is in retaliation for Seoul's handling of a months-long dispute over compensation for wartime labor.
South Korean Minister of Trade, Industry and Energy Sung Yun-mo said that an "emergency inspection" found no sign of illegal transactions. "Is that a problem from the standpoint of the WTO?"
The dispute stems from Tokyo's frustration at what it calls a lack of action by Seoul over a South Korean court ruling last October that ordered Nippon Steel to compensate former forced labourers.