The move comes amid a trade row between Tokyo and Seoul, which erupted after a court ruling stating that Japanese companies should pay compensation to South Korean forced labour victims during the colonial period.
The South Korean Ministry of Trade, Industry and Energy has announced plans to remove Japan from its “white list”, cancelling trade preferences for Tokyo.
According to Trade Minister Sung Yun-mo, the retaliatory measures are expected to come into effect in September.
Japan also imposed several restrictions on its neighbour last month, limiting their exports of fluorinated polyamides, photoresists and hydrogen fluoride, essential for the production of memory chips and smartphones.
This could reportedly affect such electronics giants as Samsung Electronics Co. and SK Hynix Inc.
This decision is believed to be a response to a South Korean court’s verdict in June that Japanese companies must provide compensation to victims of forced labor during the Japanese colonisation of the Korean Peninsula between 1910-1945.