The Japanese government will on July 4th announce fresh sanctions against South Korea over South Korean ruling on war-time forced labor, the Sankei newspaper reported on Sun.
The chemicals affected by the move are fluorinated polyimide, which is used in the manufacture of displays, the photosensitising agent resist used in chip manufacture, and hydrogen fluoride, which is used to clean chips.
Despite the likelihood of Japan ratcheting up its economic retaliation beyond the core material shipments bound for South Korea, Seoul has few options for counterattack as a tit-for-tat move could devastate the reciprocal value chain between the two neighboring countries that are the second and fourth largest economies in the region, experts observe.
Seoul called the measures unfair and in violation of worldwide laws, adding that it would respond firmly, Reuters reports.
The imposition of export controls, which effectively ends Japan's preferential trade treatment of South Korea, means that it could take up to 90 days for exporters to obtain the required permission, according to global media reports.
"As trust has been lost, we can not have a dialogue and are unable to ensure that proper export controls are being taken", a spokesman for METI said.
The relationship between Japan and South Korea has been strained for decades as a result of Tokyo's brutal 1910-45 colonial rule over the Korean peninsula.
It said Japan was effectively removing South Korea from a list of countries including the United States and many European nations that face minimum restrictions on trade.
Yoshihide Suga, the chief Cabinet secretary, said Tuesday that the move was part of "appropriately implementing export controls for national security reasons".
Japan on Tuesday stood by its decision to impose stricter controls on exports of some technology-related products to South Korea amid souring bilateral tensions triggered by a wartime labor dispute between Tokyo and Seoul.
Mayumi Negishi and Eun-Young Jeong report that the export controls could affect Samsung Electronics, SK Hynix Inc., and LG Display Co.
South Korea plans to file a complaint with the World Trade Organization over Japan's imposition of restrictions on its exports of key technology materials to South Korea.
Japan, produces about 90% of the fluorine polyimide and 70 % of the etching gas in the world. Photoresists are thin layers of material used to transfer circuit patterns onto semiconductor wafers.
Asked about the potential downside, Suga said the government will "closely watch the impact on Japanese firms".
Ties between Seoul and Tokyo have sunk to their lowest point in years since South Korea's top court last autumn ordered Japanese firms to compensate South Koreans over wartime forced labor.
Since late past year, Korea's Supreme Court has delivered rulings in favor of Korean plaintiffs demanding individual reparation, separate from the inter-government settlement and bundled compensations for wartime and colonial aggressions in the 1965 basic treaty that normalized diplomatic relations.
"We are looking into the matter", said a spokeswoman for South Korea's biggest chipmaker, Samsung Electronics Co.
South Korea proposed last month that companies from both countries fund compensation for the plaintiffs, but Japan rebuffed the proposal.