South Korea has announced it is removing Japan from its list of nations that receive preferential treatment in trade in what is being seen as a tit-for-tat reaction to a recent diplomatic spat.

The Ministry of Trade, Industry and Energy said Japan will now be placed in a new third category in which it will be subjected to narrowed conditions for applying comprehensive licenses for strategic goods.

A longer approvals process for exports of between five and 15 days will also apply as procedures are tightened.

It is not yet clear how these tightened export controls will affect bilateral trade, but Seoul has said some South Korean companies exporting to Japan will be eligible to receive exceptions as part of case-by-case inspections that would normally only apply to sensitive products.

This comes after Tokyo recently downgraded South Korea's status as a favoured trade partner and also imposed stricter controls on certain technology exports to the nation.

South Korea's trade minister Sung Yun-mo said Japan has "failed to uphold international principles".

The changes are expected to come into effect at some point next month.