The United States on Thursday expressed concern that Japan will follow through on its threat to remove South Korea from a "whitelist" of countries given preferential treatment in export procedures, leading to an escalation of tensions between the two sides, Reuters reported.
Japan is expected to drop South Korea from the list on Friday, just weeks after it tightened controls on the export of some high-tech materials to the neighboring nation.
Seoul regards the measures as retaliation for South Korean court rulings ordering Japanese compensation for victims of forced labor during Tokyo's 1910-45 colonial rule of the Korean Peninsula.
"A deterioration in the trading relationship between South Korea and Japan could have negative repercussions for both of their economies and beyond if it leads to a downward spiral, a tit-for-tat," Reuters quoted a senior US government official as telling reporters.
Washington is urging Seoul and Tokyo to consider a "standstill agreement" to allow time for negotiations, the official said.
Earlier reports said the agreement would commit the two sides to refrain from further actions for a set period of time.
US Secretary of State Mike Pompeo is set to meet with South Korean Foreign Minister Kang Kyung-wha and Japanese Foreign Minister Taro Kono on the sidelines of a security forum in Bangkok on Friday.
He told reporters Thursday that he hopes "they will find a way to move forward together."
"Japan and South Korea are both incredibly important relationships," the secretary said. "We're very hopeful that those two countries will together themselves find a path forward, a way to ease the tension that has risen between them over these past handful of weeks."
Reuters said the senior US official also expressed concern about Seoul's apparent willingness to take steps that undermine trust between the two countries.
Seoul has taken actions that "appear to have been aimed or even calculated for political effect to whip up anti-Japanese sentiment in South Korea," the official was quoted as saying.
The US has emphasized the importance of trilateral cooperation in efforts to dismantle North Korea's nuclear weapons program.
The current dispute could hurt that initiative.
"I can tell you that it could have the effect of making it more difficult to work out an agreement with North Korea given that Japan and South Korea would both play essential roles in any eventual possible deal with North Korea on denuclearizing North Korea," the official was quoted as saying. (Yonhap)