Prime Minister Lee Nak-yon said Tuesday the government will propose additional funding to foster South Korea’s industrial materials production.

He emphasized the urgency of nurturing the industry, referring to a recent trade dispute with Japan, as he presided over a weekly Cabinet meeting. 

“(The government) plans to ask the National Assembly (to approve) the additional funding necessary for that in the extra budget this time,” Lee said.

In April, the government proposed a 6.7 trillion-won ($5.6 billion) supplementary budget to cope with the economic slowdown and fine dust air pollution.

A bill is still pending at the parliament amid a call by the main opposition Liberty Korea Party to slash much of the proposed spending.

The prime minister stressed the need for lawmakers to pass the supplementary budget bill during the ongoing parliamentary session, saying internal and external economic conditions are grave.

Tokyo has removed preferential treatment for Korean firms importing Japanese chemical materials crucial in the manufacturing of semiconductors and digital displays. Japan said Korea is no longer deemed a trustworthy buyer of its products, claiming Seoul is not abiding by a 1965 treaty in handling historical issues, particularly those concerning wartime forced labor.

Lee’s comments come as Seoul scrambles to respond to Japan’s move, which is expected to come as a severe blow to South Korean electronics and semiconductor makers.

On Monday, President Moon Jae-in urged Japan to retract the measure, while calling on government agencies to work closely with the business community to deal with the “unprecedented emergency.”

Saying the move by Japan was politically motivated, Moon called on Japan to engage in talks with Seoul.

Japan, however, has rejected the call for talks, with Trade Minister Hiroshige Seko saying the Japanese government has no plans for retracting the measure.

While Moon stressed the need for the two countries to resolve the issue diplomatically, he also warned that Seoul will be forced to take “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.

Moon is also set to meet with leaders of the country’s largest corporations on Wednesday as part of the administration’s efforts to minimize the impact on local firms.

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