President Moon Jae-in on Monday urged Japan to withdraw restrictions on exports of hi-tech materials to South Korea, while calling on government agencies to work closely with the business community to deal with the “unprecedented emergency.”

Speaking at a weekly meeting with senior presidential aides, Moon said that Japan’s move violates principles of free trade, and urged it to reconsider using trade for political ends.

“(I) urge Japan to withdraw the measures, and call for sincere negotiations between the two countries,” Moon said, adding that the “vicious cycle of measures, and countermeasures” does not benefit either country.

While stressing that Seoul will take steps to resolve the situation diplomatically, Moon warned that the country will “not be able to withhold necessary measures” if Japan’s move leads to real damages to local companies.

He did not elaborate on the “necessary measures,” but government officials have said that the matter could be taken to the World Trade Organization for dispute settlement.

The Japanese government has removed Korea from the list of countries that receive preferential treatment in importing fluorinated polyimide, resist and etching gas from domestic firms.

Fluorinated polyimide is used to make flexible organic light-emitting diode displays; resist is a thin layer used to transfer a circuit pattern to a semiconductor substrate; and etching gas is used in the semiconductor fabrication process.

Japan’s move has been interpreted as being a retaliation for the top Korean courts’ order saying Japanese firms have to compensate Koreans who were mobilized as forced labor during Japan’s occupation of the Korean Peninsula in the first half of the 20th century. Japan claims that all related issues were settled through a 1965 treaty.

Japan denies the allegations that export restrictions are politically motivated, and its leaders, including Prime Minister Shinzo Abe, have hinted that the measure was rolled out in response to Seoul’s failure to enforce sanctions on North Korea.

At Monday’s meeting, Moon also called on the government to work closely with the business community to draw up response measures.

“Depending on (how) the situation develops, establishing an emergency response system (operated by) the private and public sector should be considered,” Moon said, going on to say that the presidential office and all concerned ministries should work with the affected companies.

He also stressed the need to reduce the manufacturing industry’s dependence on imports for key materials and equipment.

By Choi He-suk (cheesuk@heraldcorp.com)