Photo: The Canadian Press

A statue of a girl representing thousands of Korean women enslaved for sex by Japan's imperial forces before and during World War II, is seen as participants hold signs reading "Reconciliation and Healing Foundation" during a weekly rally against Japanese government near the Japanese Embassy in Seoul, South Korea, Wednesday, Nov. 21, 2018.

South Korea said Wednesday it will dissolve a foundation funded by Japan to compensate South Korean women who were forced to work in Japan's World War II military brothels.

The widely expected decision, if carried out, would effectively kill a controversial 2015 agreement to settle a decades-long impasse over the sexual slavery issue and threatens to aggravate a bitter diplomatic feud between the Asian U.S. allies over history. Many in South Korea believed the Seoul government settled for far too less in the sex slave deal and that Japan still hasn't acknowledged legal responsibility for atrocities during its colonial occupation of the Korean Peninsula from 1910 to 1945.

Japanese Foreign Minister Taro Kono sharply criticized South Korea's decision to shut down the foundation, saying that Seoul would violate the "most basic rule to live in the international society" by walking back on the deal. Japanese Vice Foreign Minister Takeo Akiba summoned South Korean Ambassador to Japan Lee Su-hoon to the ministry to lodge a protest.

"The announcement is problematic and unacceptable," said Kono, urging Seoul to stick with the agreement signed under its previous government. South Korea's Foreign Ministry couldn't immediately confirm Kono's comments that Ambassador Lee told Japanese officials Seoul doesn't plan to scrap or renegotiate the agreement.

Seoul's Ministry of Gender Equality and Family said it will take legal steps to dissolve the foundation, a process ministry officials said could take months. Lee Nam-hoon, an official from the gender equality ministry, said Seoul's Foreign Ministry plans to consult with Tokyo on what to do with the 1 billion yen ($8.8 million) Japan funded to the foundation that was formally launched in July 2016.

"After considering diverse opinions over the 'Reconciliation and Healing Foundation' based on victim-centric principles, we have decided to push for the dissolution of the foundation," Gender Equality Minister Jin Sun Mee said in a statement. She said the ministry will continue to push policies to "restore the honour and dignity" of the sexual slavery victims.

The decision was welcomed by hundreds of protesters gathered in Seoul for a weekly rally denouncing sexual slavery by Japan's wartime military. Organizers played a recorded message by a hospitalized 92-year-old victim, Kim Bok-dong, who said she was happy that the foundation was getting dissolved but also demanded a proper apology and compensation from Tokyo.