Japan will restore South Korea to a list of trusted trade partners in July, the government said Tuesday, reversing its 2019 removal during a dispute over historical forced labor.
The move, which reciprocates Seoul's reinstatement of Japan to its own trade "white list" earlier this year, marks the latest step in efforts by the neighbors to thaw ties.
Trade with South Korea will again enjoy a fast-track approval process from July 21, Tokyo's trade ministry said.
Relations between the two U.S. allies have long been testy due to bitter memories of Japan's brutal occupation of the Korean peninsula from 1910 to 1945.
South Korea's Supreme Court in 2018 ordered Japanese firms to compensate the wartime victims of forced labor, triggering an escalating series of tit-for-tat economic measures.
However, since South Korean President Yoon Suk Yeol came to power last year, he has worked to quickly strengthen ties with Japan in the face of North Korean threats.
In March, Yoon unveiled a plan to compensate victims without direct involvement from Tokyo, in a move that was unpopular domestically but helped improve ties with Japan.
Since then, Yoon and Japanese Prime Minister Fumio Kishida have resumed regular high-level talks, with Yoon in Tokyo in April and Kishida travelling to Seoul last month.
Japan also this year ended export controls on materials for semiconductors destined for South Korea, while Seoul dropped a WTO complaint against Japan and has moved to normalize a military intelligence-sharing pact.