By Hyonhee Shin
SEOUL (Reuters) - South Korea said on Wednesday it had proposed a joint fund with Japan to compensate South Koreans forced to work by Japanese companies during World War Two, but Japan rejected the idea out of hand.
South Korea and Japan share a bitter history that includes the 1910-45 Japanese colonisation of the Korean peninsula, the forced mobilisation of labour at Japanese companies and the use of comfort women, Japan's euphemism for girls and women, many of them Korean, forced to work in its wartime brothels.
The Korean proposal aims to resolve an issue that has strained relations since a series of rulings by South Korean courts ordered Japanese firms to compensate former labourers.
Japan says the claims were settled in a 1965 treaty that normalised ties and has accused Seoul of breaking that treaty.
South Korea's foreign ministry said the fund would receive contributions from Japanese firms sued by former labourers and South Korean companies that benefited from the 1965 treaty.
But a Japanese foreign ministry spokesperson said the proposal was not the answer.
"Japan strongly calls on Korea to take appropriate measures, including redressing the violation of international law, but the proposal currently put forth by the Korean side does not do this," the spokesperson said in an email.
The South Korean court rulings ordered Nippon Steel & Sumitomo Metal Corp and Mitsubishi Heavy Industries Ltd. to pay hundreds of thousands of dollars to South Korean plaintiffs.
Speaking at a regular news conference before the South Korean announcement, Japanese Chief Cabinet Secretary Yoshihide Suga repeated Tokyo's call to refer the dispute to an international arbitration panel, which the Japanese foreign ministry spokesperson echoed.
Under the 1965 treaty, South Korea received a package of $300 million in economic aid and $500 million in loans from Japan in exchange for Seoul considering all pre-treaty compensation issues settled.
The money was largely spent to rebuild its infrastructure and economy ravaged by the 1950-53 Korean War, but former forced labourers began to demand compensation in the 1990s.
The rows over wartime history have long been a stumbling block for relations between the neighbours, sparking concern that the dispute could impact joint efforts to rein in North Korea's nuclear programme.
(Reporting by Hyonhee Shin; Additional reporting by Jane Chung and Ju-min Park in SEOUL and Elaine Lies and Linda Sieg in TOKYO; Editing by Nick Macfie)