Tokyo has decided to remove South Korea from its list of countries that enjoy preferential trade relations with Japan.
Prime Minister Shinzo Abe's government endorsed Seoul's removal from the "
Japan says all reparation issues were settled in a 1965 bilateral treaty that normalized their diplomatic relations and that the reparation claims are thus invalid.
In July, Japan introduced export controls on three key high-tech material exports to South Korea used in making chips and displays, citing what it claims are security concerns.
However, the move is widely believed to be a retaliatory measure for the court rulings.
Japan's Trade Minister Hiroshige Seko said after the Cabinet meeting that the new measure will take effect on August 28, three weeks after Tokyo promulgates it on Wednesday.
From that point onward, most Japanese exporters will need to secure individual permits for peninsula-bound shipments, potentially delaying or disrupting nearly all exports to South Korea.
South Korea was added to the 27-member whitelist in 2004 and will become the first country to be removed from the list.