A South Korean man stands next to a sign with a picture of the Japanese Prime Minister Shinzo Abe during a rally to denounce Japan's trade restrictions on South Korea in Seoul, South Korea, Aug. 8, 2019.
A South Korean man stands next to a sign with a picture of the Japanese Prime Minister Shinzo Abe during a rally to denounce Japan's trade restrictions on South Korea in Seoul, South Korea, Aug. 8, 2019.

Japan says it does not understand why it has been removed from South Korea's list of trusted trade partners, the latest move in an escalating trade dispute between the Asian neighbors.

Seoul announced Monday that it had moved Tokyo to a new category that brings more restrictions on exports of sensitive goods. Trade Minister Sung Yun-mo said the new category was for countries that have managed their export controls in a way that violates international norms.

Japanese Trade Minister Hiroshige Seko said on Twitter Tuesday that South Korea has not adequately explained how Japan does not conform to the global export standards.  

The move is the latest in a back-and-forth trade dispute between the two countries which has included Japan dropping South Korea from its own list of preferred trading partners.

Tokyo insists its trade decisions were motivated by national security concerns, while the moves are widely seen as retaliation for recent South Korean court rulings ordering Japanese companies to compensate Koreans who were forced to work during Japan's colonial occupation of Korea. 

A trade war between Japan and South Korea, the world's third and 11th largest economies, respectively, would have wide-ranging ramifications.

It could threaten global technology supply chains, since South Korea produces 70 percent of the world's memory chips.

The change is due to go into effect in September. Once it does, South Korean companies wanting to send sensitive goods to Japan will have to go through an approvals process that takes up to 15 days, up from about five days under the current system.

Japan's new policy begins August 28 at which time Japanese companies will need to seek case-by-case approval from the country's trade ministry before shipping certain products to South Korea.