South Korean President Moon Jae-in on Friday condemned Japan's decision to remove his country from a "white list" of favoured trading partners, calling it a "reckless" move and threatening unspecified countermeasures.
Tokyo's "selfish act will inflict tremendous damage on the world economy by disrupting global supply chains", he said in remarks to a cabinet meeting called at short notice and televised live.
"Japan should withdraw its unilateral and unfair measures as soon as possible and come to dialogue," he added in resolute tones, wearing a jacket and shirt but no tie.
"Responsibility for what is going to happen next also lies squarely with the Japanese government."
Neighbours Japan and South Korea are both democracies, market economies and US allies faced with threats from North Korea and an ever more assertive China.
But their own relations are soured by bitter disputes over territory and history stemming from Tokyo's colonial rule over the peninsula in the first half of the 20th century.
Moon said Seoul will "gradually toughen" its response to its neighbour, a key trading partner with which it did $85 billion of business last year.
"Though Japan is an economic powerhouse, if it were to damage our economy, we likewise have countermeasures to implement in kind," he said, threatening to inflict "major damage".
Moon regularly highlights Japan's past colonial rule and stresses the independence struggle is at the heart of national identity in both Koreas, while framing the South's right wing as the descendants of pro-Japanese collaborators.
The issue is intensely political, with Moon -- who brokered international dialogue with North Korean leader Kim Jong Un -- under pressure from conservatives looking to paint him as sympathising with Pyongyang.
This year is the 100th anniversary of the March 1 independence movement in Korea, and authorities draped several buildings in central Seoul with giant images of resistance heroes.
Doubling down on his position, Moon made several references to the two countries' "unfortunate" history on Friday.
"Forcing a nation into submission is a relic of the past," he said. "We may face difficulties in the short term. But if we succumb to challenge, history will repeat itself.
"If Japan, the perpetrator in this case, intends to re-inflict the wounds at this point, it should face reality squarely that international norms will not tolerate it."