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Reports: South Korea to drop Japan from its list of most trusted trade partners

South Korea said it will remove Japan from its list of most trusted partners in retaliation against Japan's decision to downgrade South Korea's trade status, but has offered a discussion before the move takes effect in September.

The Asian tiger plans to split its fast-track category into two, placing Japan as the only country in the second category, Bloomberg reported, citing the country's Ministry of Trade, Industry and Energy.

The new category will comprise of countries whose export control systems do not adhere to the "international export control principles," South Korea's industry minister Sung Yun-mo said, according to Reuters. Japan has been added to the list because of its inappropriate trade actions, another minister added.

Following the move, Japan will be listed in the "Ga2" category and will be treated "in principle" as the countries listed in South Korea's "Na" category, thus being downgraded from the "Ga" list, which comprises of the country's most trusted trade partners.

Consequently, South Korean exports to Japan will be subject to stricter trade regulations, including potential long application processes.

Sung Yun-mo said that the country is ready to have a discussion with Japan during its 20-day review period before its neighbor is put in the new list in September.

The action follows Japan's announcement to remove South Korea from its list of preferred trading partners, effective Aug. 28, amid heightened tensions over a court case involving compensation for forced labor during World War II. South Korea committed about 7.8 trillion won to research and development a few days later to stabilize supplies of technology materials.

Japan, however, gave the permit to export a high-tech material to its neighbor Aug. 8, its first approval since the imposition of tighter export controls in July.