The South Korean government says it will not extend an intelligence-sharing pact with Japan. Bilateral relations are tense over issues including trade and wartime labor.
The deputy director of South Korea's presidential national security office, Kim You-geun, said they had concluded that the agreement on the exchange of military intelligence is not in line with the country's national interests.
The agreement had been automatically renewed every year since it was signed in 2016.
Either side can pull out by giving notice by Saturday.
Japan and the United States had urged South Korea to extend the agreement.
They say 3-way cooperation, including the intelligence-sharing pact, is essential to counter threats from North Korea.
A senior official at Japan's defense ministry told NHK that South Korea's decision is unbelievable, and the government will consider its response.
Bilateral ties became strained after rulings by the South Korean Supreme Court. It ordered Japanese companies to pay compensation to South Koreans who say they were forced to work for them during World War Two.
Early this month, Japan decided to remove South Korea from a list of countries entitled to simplified export procedures. That decision will take effect next week.