SEOUL, South Korea >> South Korean President Yoon Suk Yeol on Tuesday defended his government’s contentious plan to use local funds to compensate Koreans enslaved by Japanese companies before the end of World War II, saying it’s crucial for Seoul to build future-oriented ties with its former colonial overlord.

Yoon said it resulted from government efforts to “respect the positions of victims while also seeking ways that would align with the common interests and future development of both South Korea and Japan.”

The plan aims to solve a yearslong impasse with Japan and solidify security cooperation among Seoul, Tokyo and Washington to better cope with North Korea’s nuclear threats and counter China’s regional influence. But it has met fierce opposition from forced labor victims, their supporters, and liberal opposition politicians, who have called it a diplomatic surrender and demanded direct payments and a fresh apology from Japan over the issue.

The plan announced Monday would offer reparations through a state-run foundation to a group of forced labor victims who had won landmark lawsuits against their former Japanese employers.

Japan has insisted all compensation issues were settled by the 1965 treaty that normalized relations between the two countries after it had colonized the Korean Peninsula for 35 years until the end of World War II.

The money to compensate the forced labor victims is likely to come from South Korean companies that benefited from that 1965 accord, which was accompanied by hundreds of millions of dollars in economic aid and loans from Tokyo to Seoul. Those were used in development projects carried out by the companies, including steel giant POSCO, which says it will consider contributing to the fund if requested.

Yoon said it was critical for South Korea to repair ties with Japan that deteriorated in recent years over grievances linked to Japan’s brutal rule of Korea from 1910 to 1945. Hundreds of thousands of Koreans were mobilized as forced laborers for Japanese companies, or sex slaves at Tokyo’s military-run brothels during World War II during that period.

Seoul’s plan to settle the forced labor issue could be a political gamble for Yoon at home, where many harbor deep resentment toward Japan over its colonial occupation. But experts say Yoon will continue to press to improve relations with Tokyo as he looks to strengthen South Korea’s defense in line with its alliance with the United States to cope with North Korea’s growing weapons program.

“Japan has changed from a militaristic aggressor to a partner that shares universal values with us and cooperates with us on security, economy, science and technology, and global agendas,” Yoon said at a Cabinet meeting.

“It’s clear that future-oriented cooperation between South Korea and Japan will preserve freedom, peace and prosperity not only for the two countries, but also for the entire world.”

Tensions with Japan had intensified after South Korea’s Supreme Court in 2018 upheld lower court verdicts and ordered Nippon Steel and Mitsubishi Heavy Industries to compensate Korean forced laborers.

Japan reacted furiously, placing export controls on chemicals vital to South Korea’s semiconductor industry in 2019, citing the deterioration of bilateral trust.

South Korea’s previous liberal government accused Japan of weaponizing trade and subsequently threatened to terminate a military intelligence-sharing agreement with Tokyo, a major symbol of their three-way security cooperation with Washington. South Korea eventually backed off and kept the deal after being pressured by the Trump administration.

Hours after Seoul announced its compensation plan, South Korea and Japan said they planned talks to restore their trade relations. South Korea also is suspending a case it brought to the World Trade Organization over the Japanese trade curbs.

Later on Tuesday, hundreds of opposition lawmakers and activists joined two forced labor victims in a protest at the National Assembly, holding signs that read “Out with Yoon Suk Yeol’s Humiliating Diplomacy.”

“I won’t accept (South Korean money) even if I starve to death,” Yang Geum-deok, one of the plaintiffs who won damages against Mitsubishi, said at the rally.

Kim Seong-ju, another plaintiff in the Mitsubishi suit, urged the Japanese government to acknowledge her plight.

“You told us when you dragged us to Japan that you will send us to schools and pay us if we work. Those were lies,” she said.

“We got hurt (because of grueling work) and when there was an earthquake, so many of my friends died because the house we lived in collapsed. And now we are all crippled because we were hurt.”

Lee Jae-myung, the leader of the main opposition Democratic Party, called for Yoon’s government to withdraw its “insulting” plan, which he said “isn’t a solution and will only create new problems.”

Yoon’s government insists that a South Korea-led solution to the discord was inevitable, considering Tokyo’s unwavering stance and the advanced age of surviving forced labor victims, who are mostly in their 90s. Among the 15 plaintiffs who won damages against the Japanese firms in 2018, only three are currently alive.

A senior South Korean presidential official, who spoke on condition of anonymity per department rules during a background briefing on Monday, said the government decided to release the plan after internally concluding the “Japanese government had reached the last limit on what it could do.”

He said South Korea acknowledged it would be impossible for the Japanese government to accept the idea of Japanese firms offering direct reparations to Korean victims as Tokyo sees such action as “breaking” the 1965 accord.

But South Korean Foreign Minister Park Jin expressed hope that Tokyo wouldn’t block the Japanese business community from making voluntary donations to efforts aimed at promoting “future-oriented development of bilateral ties.” He was apparently referring to proposals to create a separate fund aimed at promoting cultural exchanges and other cooperation.

Lawyers representing the victims said the government’s plan wouldn’t stop their attempts to secure payments from the Japanese companies. Those include legal steps aimed at forcing the firms to sell off their assets to arrange the reparation funds, which South Korean officials fear could cause further rupture in bilateral relations.