Japan calls South Korea's rejection of arbitration offer 'very regrettable'

"It is problematic that Seoul is leaving the situation of violating the international law as it stands," he said.

The row began after South Korea's Supreme Court ordered Japanese firms last year to compensate forced labor victims. Tokyo has strongly protested the rulings, arguing that all reparation issues were settled under a 1965 treaty the two countries signed when they normalized diplomatic relations.

In retaliation, Tokyo slapped export restrictions on the South early this month, and could take additional retaliatory measures, such as removing South Korea from a so-called whitelist of countries given preferential treatment in trade procedures.

South Korean officials have said that Japan's call for an arbitration panel is unacceptable. But they also stressed that Seoul remains open to diplomatic negotiations and is willing to consider all constructive proposals to resolve the issue.

South Korea has maintained that it cannot to intervene in civil litigation, saying it honors court decisions under the democratic constitutional principle that guarantees the separation of the executive, legislative and judicial powers.

In an effort to address the acrimonious dispute, Seoul proposed last month that South Korean and Japanese firms create a joint fund to compensate victims of forced labor. However, Tokyo immediately rejected the overture.

In Friday's meeting, Japan's foreign minister and the South Korean envoy exchanged testy remarks.

Kono claimed that what South Korea is doing amounts to "overturning the international order since World War II" and demanded Seoul take steps to correct the situation.

In response, Nam said he will convey what Kono said to the government in Seoul. But the envoy also said that Japan's "unilateral measures" are undermining the foundation of Korea-Japan relations, and that the two sides should try to resolve the issue through dialogue.

As the envoy recalled Seoul's recent proposal to compensate victims, Kono interrupted him and stressed that the proposal is completely unacceptable. Kono also accused Seoul of making the proposal, knowing that Japan is not going to accept it. He called Seoul's attitude "extremely rude."

To defuse tensions with Tokyo, Seoul has also been hoping that the United States will mediate between the two countries to find a dialogue-based solution or forestall an escalation of the increasingly rancorous dispute between the two US allies.

David Stilwell, the new top US diplomat for East Asia, said during his visit to Seoul on Wednesday that the South and Japan should resolve the issue on their own and that Washington will do "what it can" to help support their efforts.

On Thursday, President Moon Jae-in and the heads of five major political parties held a rare meeting and agreed on the need for bipartisan efforts to cope with Japan's use of trade as a means of retaliation over the historical issue.

But the dispute showed signs of spreading to security cooperation between the two countries.

On Thursday, South Korea's national security adviser, Chung Eui-yong, briefed party leaders attending the meeting with Moon that Seoul could review whether to renew a military information sharing pact with Japan, according to a lawmaker who attended the briefing.

In November 2016, Seoul and Tokyo signed the bilateral General Security of Military Information Agreement. The pact enables the two countries to share confidential military information so as to better cope with nuclear and missile threats from North Korea.

The accord is supposed be automatically renewed every year unless either party notifies the other of its intention to terminate the agreement 90 days ahead of the end of a one-year period. (Yonhap)