(Adds comment from Moon spokeswoman, details of forced labour dispute)
By Hyonhee Shin and Josh Smith
SEOUL, July 18 (Reuters) - South Korea's President Moon Jae-in and leaders of the country's major political parties vowed on Thursday to work together to resolve a worsening political and economic dispute with Japan.
Moon met leaders of five parties to discuss Japan's recent export restrictions on some high-tech materials used by major South Korean companies, as well as a dispute over Japan's wartime use of forced labourers.
According to the Yonhap news agency, Shim Sang-jeung of the small opposition Justice Party told reporters afterwards that a national security official had said South Korea may reconsider an intelligence sharing agreement with Japan if the dispute worsens.
A spokeswoman for Moon's office later underscored that Seoul fundamentally supported keeping the deal, but that it could be up for discussion depending on the situation.
The bilateral General Security of Military Information Agreement (GSOMIA) is automatically renewed every year and is primarily aimed at countering nuclear and missile threats from North Korea.
Any change in security cooperation between Japan and South Korea would likely worry the United States, which has called on is two important Asian allies to resolve their differences.
Japan's export curbs were an "unjust economic retaliation" and the South Korean political leaders agreed to work together to mitigate their impact on the economy, they said in a joint statement after their meeting.
"The government and both ruling and opposing parties will make bipartisan efforts to cooperate against Japan's economic retaliation and minimise any economic damage," they said.
Recent tension between the neighbours, largely over the issue of compensation for South Koreans forced to work for Japanese occupiers before and during World War Two, took a sharp turn for the worse this month when Japan restricted exports of high-tech materials to South Korea.
Japan has denied that the dispute over compensation for labourers is behind the export curbs, even though one of its ministers cited broken trust with South Korea over the labour dispute in announcing the restrictions.
Instead, Japan has cited "inadequate management" of sensitive items exported to South Korea, with Japanese media reporting some items ended up in North Korea.
South Korea has denied that.
The political leaders said they would seek to strengthen the competitive edge of South Korea's tech industries as well as shore up the fundamentals of the economy.
"We demand the Japanese government withdraw its retaliatory economic measures immediately, and seek a diplomatic resolution rather than take additional measures," they said, warning Japan not to remove South Korea from its "white list" of countries with minimum trade restrictions.
Moon's economic policies have faced growing criticism over the past year, while some business figures have questioned his administration's handling of the widening feud with Japan.
The South Korean population, however, has generally supported the Moon administration's willingness to relitigate what they see as unresolved historical disputes dating back to Japan's occupation.
Moon's approval ratings rose 2.9 percentage points from a week earlier on the back of the spread of anti-Japan sentiment and his administration's stern messages over Japan's export curbs, pollster Realmeter said on Thursday.
In an earlier survey on Tuesday, 73% of South Koreans said the government's response to Japan's export curbs was appropriate or should be stronger.
In a Realmeter survey on Wednesday about 55% of respondents said they were boycotting Japanese products, up 6.6% points from a week earlier.
Thursday marked a deadline for South Korea to accept a Japanese proposal to seek third-country arbitration after South Korean courts ordered Japanese companies to pay compensation for using forced labour. South Korea has rejected that idea.
Japan is considering taking the dispute to the International Court of Justice as the deadline passes, Japan's public broadcaster NHK reported.
South Korea's Supreme Court last year ordered two Japanese companies to compensate the wartime workers in a ruling that Japan said violated international law. Japan believes the issue of compensation was settled under a 1965 treaty. (Reporting by Hyonhee Shin and Josh Smith. Additional reporting by Minwoo Park. Editing by Robert Birsel and Nick Macfie)
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