Moon said in a Cabinet meeting that Japan is being dishonest by insisting that its trade curbs weren't retaliation over historical issues, including South Korean court rulings that called for Japanese companies to offer reparations to aging South Korean plaintiffs for forced labor during World War II.
He said Japan should look "squarely at the past" and that its current actions were aggravating the pain and anger of South Koreans who suffered under Japan's brutal colonial rule of Korea from 1910 to 1945.
"Japan has yet to even state an honest reason for its economic retaliation .... No matter what excuse it provides as justification, it is clear that the Japanese government has linked historical issues to economic matters," Moon said.
Moon spoke hours before the countries' diplomats held working-level meetings in Seoul to discuss the trade row and security issues related to North Korea. Seoul's Foreign Ministry said its director-general for Asian and Pacific affairs, Kim Jung-han, demanded Tokyo restore South Korea as a favored trade partner during his meeting with Kenji Kanasugi, director-general of Asian and Oceanian affairs at Japan's Foreign Ministry. The ministry said Kim and Kanasugi also discussed the forced labor issue but did not elaborate.
Tokyo's recent moves to tighten controls on exports to South Korea, where major manufacturers like Samsung heavily rely on materials and parts imported from Japan, have touched off a full-blown diplomatic dispute.
Seoul plans to similarly downgrade Japan's trade status and terminate a bilateral military intelligence-sharing pact with Japan that symbolized the countries' three-way security cooperation with the United States in face of North Korea's nuclear threat and China's growing influence. Following an angry reaction from Washington, Seoul said this week it could reconsider its decision to end the military agreement, which remains in effect until November, if Japan relists South Korea as a favored trade partner.
Tokyo has justified its trade curbs by raising unspecified security concerns over South Korea's export controls on sensitive materials that could be used for military purposes and denied Seoul's accusations that it was retaliating over the history row.
But Japanese government spokesman Yoshihide Suga did say on Thursday that the issue surrounding wartime forced laborers was the "biggest problem in bilateral relations." Japan insists that all compensation matters were settled when the two countries normalized relations under a 1965 treaty and that the South Korean court rulings go against international law.
Suga said Tokyo will continue discussions with Seoul over the issue, but didn't specifically comment on Moon's remarks. Moon said South Korea will employ a variety of measures to minimize the impact of the Japanese trade curbs on its trade-dependent economy.
"We will take this as an opportunity to elevate our economy to a new level by strengthening competitiveness of the manufacturing sector and other industries," Moon said. "As a sovereign state, we will also resolutely take steps to respond to Japan's unjust economic retaliation."
Japan's downgrading of South Korea's trade status, which took effect Wednesday, followed a July move to strengthen controls on exports of chemicals South Korean companies use to produce computer chips and displays for smartphones and TVs, which are among South Korea's key export items.
South Korea's removal from Tokyo's trade "whitelist" means that Japanese companies would need to apply for approval for each technology-related contract for South Korean export, rather than the simpler checks granted a preferential trade partner, which is still the status of the United States and others.
__ Associated Press writer Yuri Kageyama in Tokyo contributed to this report.