They also agreed to form a government-led committee to focus on boosting the materials, parts and equipment industries. Finance Minister Hong Nam-ki will chair the panel.

Moreover, the government and the ruling party will improve current laws and regulations so as to meet demand from local businesses and research centers.

About 100 firms will be given full financial and administrative support to become global companies, while the government will increase subsidies for research on key strategic items and materials.

Last week, Japan's Cabinet approved a proposal to strip South Korea from a list of countries subject to preferential trade status following its July 4 imposition of export curbs on high-tech materials against the South over a historical issue.

South Korean President Moon Jae-in has denounced Japan's move as a "very reckless decision," warning that South Korea will take corresponding measures and that Japan will bear full responsibility for the consequences.

The finance ministry also said it will remove Japan from its own list of trusted trading partners in an escalating trade war between the two neighbors.

In line with the government's efforts to prop up the slowing economy and tackle Japan's export curbs against Seoul, the National Assembly passed a 5.83 trillion-won supplementary budget bill on Friday.

"Japan turned away from diplomatic talks and arbitration by the United States and made an economic attack on us," Prime Minister Lee Nak-yon said before the start of the tripartite meeting. "But the government has prepared for comprehensive countermeasures against possible attacks by Japan."

Lee said the government aims to foster the local materials and parts industries to decrease technical dependence on Japan, strengthen business partnerships between large and small companies, revive the manufacturing industry and create more jobs for younger generations.

"This is the way that we have to go in the long term, even without the latest Japanese actions," the prime minister said. "The government will continue to go ahead with the plans in order to help the country turn this misfortune into fortune."

Lee Hae-chan, the chairman of the ruling Democratic Party, said that the government should give full support to local businesses to defend themselves from the current Seoul-Tokyo trade row.

"Nearly 100 companies are expected to be affected by the Japanese measures," he said. "The government should take an active approach to helping companies carry out industrial reform and innovating in the local manufacturing industry."

Separately, Ha Tae-keung of the minor opposition Bareunmirae Party said four South Korean and three Japanese lawmakers have agreed to push for a bill on the issue of Korean forced labor.

Ha wrote in a Facebook message that the bill calls for, among other things, the creation of a fund by the South Korean and Japanese governments, as well as relevant companies of the two countries, to try to resolve the issue of forced labor.

Ha said Masaharu Nakagawa, a Japanese independent lawmaker, floated the idea on the sidelines of an international conference on North Korean human rights held in Spain late last month.

Ha added that Nakagawa and two other Japanese opposition lawmakers did not say they will propose a bill, however.

Japan's decision on Friday was the second retaliatory step against last year's South Korean Supreme Court rulings ordering Japanese firms to compensate South Korean victims of forced labor during Japan's 1910-45 colonial rule of the Korean Peninsula.

Japan has lashed out at the rulings, claiming that all reparation issues stemming from its colonial rule were settled under a 1965 government-to-government accord that normalized bilateral relations. (Yonhap)