Last year, South Korea's Supreme Court ordered Japanese firms to compensate the Koreans forced to work for them during Japan's colonial rule.
Japan refused to follow the order, and imposed trade restrictions on Seoul, citing unspecificed "security reasons."
And because of a loss of trust, Seoul on Thursday decided to terminate the military-information sharing pact.
Numerous experts say their dispute has now officially expanded from trade to security.
"It seems Japan was hugely taken aback by Seoul's decision, and I think it showed South Korea's firm stance that it will face Japan squarely and firmly when it comes to historical issues. So, if they continue to go after each other hard, I think this standoff could go on for a long time."
The consensus is that the dispute has become even harder to solve.
And the experts differ on what will be the best way.
"The South Korean government should separate the problems. On the forced labor ruling, Seoul should think more about what it can do, focusing on providing relief to the victims. On the trade restrictions, Seoul should suggest talks in which it not simply asks Japan to lift the curbs, but explains the impact on its economy. Then I think Japan will come to the table. And on the security issue, it's a regional matter, so efforts need to be made with Washington."
But with South Korea having continuously requested talks with Japan, some say Japan should be the one to make the next move.
"The South Korean government offered to talk with Japan numerous times to find a solution that satifies them both. But Japan has not been responding to those or any other gestures. It's simply been saying that it or its firms cannot pay a single penny. Logically and ethically, this is not right. The solution is for Tokyo to come to the table with sincerity."
Until that happens, Professor Yang says Seoul will have take more countermeasures including diplomatic outreach and a possible appeal at the WTO.
The latest decision, he said, on the military intel pact was the least Seoul could do in that sense.
Lee Ji-won, Arirang News.