Japan has outright rejected the South Korean government’s proposal that companies from the two countries create a joint fund to compensate victims of Tokyo’s wartime forced labor.

The Japanese government turned down the offer less than an hour after Seoul’s Foreign Ministry announced the proposal Wednesday without prior consultation with the companies. 

Japanese Foreign Minister Taro Kono said the government could not accept it, as it would violate international law.

The Japanese government stated its position in a press conference.

Nevertheless, Seoul continues to hope for Tokyo’s “sincere consideration,” according to a Foreign Ministry official.

During a visit to Japan from Sunday to Monday, Vice Foreign Minister Cho Sei-young had brought up the proposal, but Tokyo reportedly did not state whether it would accept it or not at the time.

On Wednesday morning, Kenji Kanasugi, director-general at the Japanese Foreign Ministry’s Asian and Oceanian affairs bureau, called in Kim Kyung-han, political minister of the South Korean Embassy in Tokyo, to request forming an arbitration panel consisting of third-country members to discuss Japan’s wartime forced labor.

The move came as South Korea had not accepted Japan’s request made on May 20 to form a panel comprising one member each from the two countries and another from a third country based on dispute settlement procedures set forth in a1965 bilateral.

Japan insists that the South Korean Supreme Court’s ruling that ordered Japanese firms to compensate victims violates the two countries’ 1965 treaty on matters of reparation, which has the effect of international law. Japan maintains that all compensation-related issues were settled under the 1965 accord.

Seoul’s latest offer is “a realistic plan, as the government cannot directly intervene in an issue between private entities,” the Foreign Ministry official said.

However, victims have expressed dissatisfaction with the proposed plan.

A civic group that supports victims of Japan’s wartime sexual slavery and is leading a class action suit with forced labor victims against Japanese firms said in a statement Wednesday that Seoul’s position “does not say anything about the recognition of historic facts or an apology, which are the beginning of a solution to the forced labor issue.”

The civic group also said the government did not have enough discussions with the civic community before announcing its position.

Meanwhile, concerned Korean companies remain cautious.

An official at Posco -- which was established with reparation funds from Japan in 1965 and is therefore top on the list of possible donors for the envisioned fund -- said his company was watching the situation, as it concerns a diplomatic issue.

Other companies mentioned as possible donors said they had not heard about the proposal beforehand, with some taken aback by the sudden announcement.

By Kim So-hyun (sophie@heraldcorp.com)