Despite having approved the first shipment of sensitive materials to the country, South Korea has gone ahead and removed Japan from its list of trusted trading partners.
The move by South Korea has now greatly escalated the trade dispute between its neighbor, further threatening to disrupt the global supply chain for electronic devices such as smartphones and flat-screen televisions.
South Korean trade minister Sung Yun-mo revealed this week that the country has officially downgraded Japan's trade status from "most trusted" to a new lower category.
The decision was reportedly based on a discussion that found Japan in violation of "basic principles" of international export control.
Japan's new trade status with the country will essentially require all South Korean firms doing business with Japanese companies to acquire more documents and permits.
The permits and licenses that will be required will have shorter life spans and will take more time to get approved. South Korea did not specifically elaborate which types of imports and exports will be directly affected by the decision.
Despite its hard-line action against Japan, South Korea officials clarified that they are still open to discussion if the Japanese government wishes to do so. South Korean official also reiterated that the decision was not a direct response to Japan's recent regulations, but a result of a separate discussion that was concluded just this week.
Japan was the first one to drop South Korea from its preferred trading partner list. Japanese officially reasoned last week that the move was to make sure that South Korea received the same treatment as its other Asian neighbors.
The move was preceded by the standoff between both nations last month when Japan imposed strict import controls on three sensitive chemicals that were required by South Korean firms to manufacturing computer chips.
Japan reasoned that the materials, namely fluorinated polyimides, photoresists, and hydrogen fluoride, can potentially be used to create weapons of mass destruction.
With the restriction essentially requires Japanese companies to obtain licenses to sell the materials to South Korea, a process that will take up to 90 days to complete.
Last week, Japan approved the first batch of sensitive material shipments to South Korea. The country issued a stern warning of possible expanded restriction is South Korea does not comply with its policies regarding the use of the materials.
Tensions between both nations initially started when a South Korean court ruled that citizens will be allowed to file lawsuits against the Japanese companies that forced them into labor during World War II. The ruling managed to open up old wounds that resulted in Japan's colonial rule over the peninsula back in the early 20th century.