Japanese Prime Minister Yoshihide Suga said the seized assets of a Japanese firm must not be liquidated to compensate Korean victims of forced labor and warned that such a move will place bilateral ties in a "very serious" situation.

During a visit to Indonesia on Wednesday, Suga said he has repeatedly urged Seoul to seek ways to resolve the issue, arguing the South Korean Supreme Court's compensation ruling goes against the two countries' 1965 treaty that normalized bilateral relations.

After Nippon Steel Corporation refused to follow the Supreme Court's 2018 ruling, the plaintiffs launched the legal process to sell the Japanese company's stake in a joint venture with South Korean steelmaker Posco.

Suga declined to comment when asked if he will boycott a trilateral summit involving both countries and China to be hosted by the South this year unless Seoul presents a resolution to the issue, adding the summit schedule has not yet been decided.

Japan's Kyodo News reported earlier that Tokyo demanded a resolution to the forced labor issue as a precondition for Suga's attendance at the summit.