WASHINGTON (Reuters) -- The United States is worried that trade and diplomatic tensions between South Korea and Japan could worsen and is urging both sides to consider a "standstill agreement" to allow more time for talks, a senior U.S. administration official said on Thursday.
The comments came a day before Japan could follow through on a threat to cut preferential trade arrangements for technology with South Korea. Relations between the two U.S. allies have sunk to their lowest point since they normalized ties in 1965.
The United States has not been asked to mediate the dispute, but U.S. Secretary of State Mike Pompeo is meeting with foreign ministers from each country at a summit in Bangkok this week. John Bolton, the national security adviser to President Donald Trump, has also recently been in Tokyo and Seoul.
The United States is concerned that Seoul has been willing to take steps that encourage anti-Japanese sentiment, the official told reporters, speaking on condition of anonymity.
Japan believes that some of Seoul's actions "have had the effect of undermining trust between Tokyo and Seoul, trust in the foundation of that relationship, and also appear to have been aimed or even calculated for political effect to whip up anti-Japanese sentiment in South Korea," the official said.
"That is something that we are concerned about."
The situation could worsen if frozen assets of Japanese companies in Korea are liquidated to settle a court ruling to pay compensation to South Koreans forced to work in Japanese factories during Japan's occupation of the Korean peninsula from 1910 to 1945, the U.S. official said.
Japan has said the issue of compensation for its wartime actions was settled by a 1965 treaty and it wants South Korea to seek international arbitration to resolve the dispute.
Washington is also worried that Japan will follow through on its threat to drop South Korea from its so-called white list of countries that enjoy minimum restrictions on trade in high-tech materials, the official said.
"A deterioration in the trading relationship between South Korea and Japan could have negative repercussions for both of their economies and beyond if it leads to a downward spiral, a tit-for-tat," the official said.
The fight also could hurt cooperation required from South Korea and Japan to come to a deal with North Korea on denuclearization - one of Trump's top foreign policy priorities, the official said.
"I can tell you that it could have the effect of making it more difficult to work out an agreement with North Korea given that Japan and South Korea would both play essential roles in any eventual possible deal with North Korea on denuclearizing North Korea," the official said.