A South Korean protester holds up signs reading "NO to Abe government" during an anti-Japanese rally in Seoul on Tuesday. South Korea on Monday put Japan into its own new export category as President Moon Jae-in called Tokyo's latest measures "very serious," intensifying a trade war between the two neighbors and US allies. Photo: AFP

Japan is "in the dark" as to why South Korea has downgraded Tokyo's trading status, its trade minister said Tuesday, amid an intensifying trade war between the two neighbors and US allies.

South Korea on Monday created a new category of trading status for Japan, with Trade Minister Sung Yun-mo saying it was "hard to work closely with a country that frequently violates the basic rules."

South Korea's list of trade partners was divided into two groups, those who are members of the world's top four export control agreements and those who are not.

But Seoul said Monday it had created a new category for countries that had signed the four pacts "but operate an export control system that violates international norms."

Japan is the only country in the new category.

The move left officials in Tokyo bemused.

"After watching the South Korean press conference, we remain completely in the dark as to the grounds on which it claims that Japan's export control system fails to comply with [international] principles," tweeted Japanese Trade Minister Hiroshige Seko on Tuesday.

South Korea's move on Monday is the latest in a series of tit-for-tat measures between the two neighbors.

On July 4, Japan tightened its rules on awarding official export permits for South Korea, meaning that screening applications could take up to 90 days.

Japan has also announced it will remove South Korea from a list of favored export partners from August 28.

South Korea quickly fired back, rescinding Japan's favored export partner status and saying it would also review a military information agreement.

The dispute has raised concerns over the potential implications for their security cooperation in the face of North Korean missile tests, and the possible impact on global supply chains.

Despite mutual criticism over policies linked to wartime history, both Japan and South Korea insist that these measures have been introduced on national security grounds.

South Korea is the fifth-largest importer of Japanese goods, while petroleum products, iron and steel products, and electrical machinery including semiconductors are the major South Korean exports to Japan, according to finance ministry trade data.