The deal announced by South Korean Foreign Minister Park Jin said victims would receive reparations from a Seoul-backed fund instead of Japanese firms linked to forced labour. “I hope that this resolution will open a new chapter in history for both Korea and Japan, help overcome antagonism and move towards the future,” he said.

President Yoon was quoted by local media as saying the decision was based on a “determination” for “future-oriented South Korea-Japan relations”.

But Seoul’s solution was met with anger from critics and the opposition liberal Democratic Party.

“This is a diplomatic disaster that amounts to giving up the country’s legal sovereignty,” spokesman Kim Young-hwan of the Center for Historical Truth and Justice, an NGO that helps forced labour victims, told This Week in Asia.

The liberal opposition Democratic Party of Korea denounced what it called “the worst humiliating disaster in diplomacy”.

“Far from helping improve relations with Japan, this will only spark a new row,” it said in a statement.

It threatened to liquidate their assets in the country if they failed to comply with the court order. The amount is now worth up to 250 million won (US$193,000) each.

Although 15 South Koreans have won such cases, none have been compensated. Roughly 200 other court procedures are ongoing.

Under the scheme, the Seoul-financed foundation for the victims will collect “voluntary” donations from local businesses and compensate other plaintiffs who win pending cases.

01:57

South Korean compensation plan for Japan’s wartime forced labour victims draws ire

South Korean compensation plan for Japan’s wartime forced labour victims draws ire

The government wants donations from South Korean companies that benefited from a 1965 bilateral treaty, such as steelmaker POSCO and KT, under which Tokyo offered US$300 million in grants to Seoul.

South Korea earlier proposed compensating the victims through this fund using donations from local businesses and called on the Japanese companies to also make contributions and apologise to the victims.

Tokyo is reportedly considering participating in a separate scholarship fund for South Korean students in Japan as a gesture of reconciliation but Japan won’t make any monetary contributions directed towards the victims, Japanese news media reported last week.

“I’d say the glass is half full rather than half empty,” foreign minister Park told journalists, expressing hope that Japan would come forward and “fill up the other half of the glass”.

As for the demand for an apology from Japan, South Korea’s presidential office on Monday acknowledged Tokyo’s past statements, including the 1998 joint statement issued by then-South Korean president Kim Dae-jung and Japanese prime minister Keizo Obuchi, Park said.

Obuchi had expressed remorse and offered an apology for all the damage and suffering inflicted on peoples of Asian countries during Japan’s colonial rule.

Lawyer Lim Jae-sung, who represents some of the victims, said the government’s plan to take over the responsibility of repaying victims from the Japanese side would be disputed in court. “The government is now turning the battle involving victims and Japan, and into one pitting victims against itself,” Lim said.

Professor Lee Won-deog of Kookmin University, an expert in Japanese affairs, said the deal had set up a “milestone” in efforts to resolve the issue that casts a long shadow over the two neighbours’ ties.

“This deal is seen as humiliating [to South Korea] and domestically unpopular. However, even if the opposition party regains power, it would be difficult for a new government to overturn the diplomatic deal that was announced so publicly,” Professor Lee said.

Conversely, Go Myong-hyun, an analyst at the Asan Institute of Policy Studies, said the government announcement represented a “positive step forward” in efforts to settle the thorny issue that has long strained ties between the two neighbours.

Additional reporting by Reuters