Japan on Friday recalled two top diplomats from South Korea in protest of a controversial statue erected outside its consulate in Busan city, a media report said.
Tokyo would also halt talks with Seoul on a planned currency swap and delay high-level economic dialogue as part of its "initial" response to the statue, Japan's Chief Cabinet Secretary Yoshihide Suga told in a press briefing on Friday.
The statue was erected by a civil group in December and represents "comfort women" -- women who were forced to work as sex slaves for Japanese soldiers during World War II, CNN reported.
"The fact that the girls' statue was set up has an unfavourable influence on relations between Japan and South Korea, and it is extremely regrettable," Suga said.
The temporary recall involves the Japanese Ambassador to South Korea and the Consulate General of Japan in Busan.
In response, South Korea's Foreign Ministry issued a statement expressing regret over Japan's decision.
"Our government stresses once again that even if there are difficult issues between the two countries, both governments, based on trust, need to continuously develop the relationship," the statement said.
But local authorities changed track and allowed it after Japan’s hawkish defence minister offered prayers at a controversial war shrine in Tokyo last week.