The Japanese-funded Reconciliation and Healing Foundation is set to be disbanded, officials in Seoul announced on Wednesday, effectively ending a milestone deal on the issue of the so-called "comfort women."

"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.

The ministry would continue its work to "restore the honor and dignity" of the sexual slavery victims, she added.

Read more: Japan's Abe to attend Pyeongchang Olympics despite 'comfort women' dispute

Not quite 'final and irreversible'

Seoul and Tokyo set up the organization in late 2015, with Japan pledging to provide ¥1 billion (€7.8 million, $8.8 million) to be passed on to the survivors and their families. Tokyo claimed the funds should not be viewed as compensation, but as "consolatory" money, stressing that the issue of compensation was settled with a separate accord in 1965.

Read more: South Korean monk self-immolates over 'comfort women' deal

In turn, South Korea pledged not to criticize Japan over wartime sexual exploitation and to push for resolving Tokyo's grievance over a statue dedicated to the victims that was placed in front of the Japanese Embassy in Seoul.

At the time, both sides praised the agreement as "final and irreversible."

Survivors sue Seoul government

However, many in South Korea harshly criticized the agreement for not firmly establishing Japan's responsibility in the matter. Opposition leaders, including current President Moon Jae-in, also slammed the government led by Park Geun-hye for not consulting the victims or giving voice to their views.

The foundation has paid out some $3.8 million to 34 survivors and relatives of 58 deceased victims, according to South Korean officials. However, 12 victims rejected payment and sued the Seoul government over the deal in 2016.

More trouble between US allies

In September 2018, Moon told Japanese Prime Minister Shinzo Abe that the foundation was failing to function due to strong opposition from the victims and the public. He also hinted that his government might soon disband it.

Before the move was officially announced on Wednesday, South Korean officials said Seoul would talk to Tokyo about handling the rest of the funds provided by Japan.

Dissolving the foundation is sure to annoy Japan and ratchet up the tensions between the two US allies in Asia. Tokyo and Seoul are already clashing over last month's verdict by South Korea's top court, which ordered a Japanese steel giant to compensate former slave laborers.

The United States has been pushing for a closer alliance between Seoul and Tokyo as a way to counter the influence of China and the potential threat by North Korea.

dj/sms (AFP, Yonhap)