The world's third-largest steelmaker Posco will donate millions of dollars to support South Koreans forced to work in Japan during colonial rule, decades after it was set up through Japanese reparations.
Other South Korean firms that also benefited from the reparations are being encouraged to follow suit, as victims of imperial Japan's forced labour schemes or their descendants keep pressing for compensation.
Japan's brutal rule over Korea from 1910 to 1945 is still a source of resentment among older generations.
But its 1965 reparations package of $800 million in grants and cheap loans, along with US aid, funded the "Miracle on the Han", which transformed South Korea's economy.
Authoritarian president Park Chung-Hee ploughed the compensation into modernising the economy and infrastructure of a country left in ruins by the 1950-53 Korean War.
A self-sufficient, integrated steel mill was Park's priority. His government poured $118 million into building the initial plant, which began production in 1972 with an annual capacity of one million tonnes.
Little was left over to compensate conscript labourers, estimated by the Seoul government to have numbered 780,000 and mostly forced overseas during World War II. It was not until 1975 that Seoul passed a law to compensate them.
The reparations scheme was poorly publicised and only 8,500 applied. The government started paying 300,000 won (now $255) for each victim but many applicants turned it down as too small.
Under new legislation in 2008, compensation was raised to 20 million won but victims were still dissatisfied. Their feelings of resentment against Tokyo and Seoul spread to Posco and other Korean corporations.
Posco in 2009 and 2010 won lawsuits filed by forced labourers or their descendants. They sought compensation because the steelmaker had benefited from the Japanese reparations.
The courts ruled Posco was not legally liable but said it would be "desirable" for the giant firm to support forced labourers or their families.
Posco's board decided in March to donate 10 billion won to a state fund soon to be launched to compensate victims.
A company spokeswoman said the decision, reported in local media last week, was not an admission of liability but a goodwill gesture. She said the firm, which was privatised in 2000, had long repaid all start-up costs.
The government will launch the fund in a few months and start paying compensation next year, said Lee Jae-Chul, spokesman for a committee in charge of the project.
In addition to Posco's donation, Seoul plans to allocate 12.5 billion won from next year's state budget. The committee will also seek "donations" from the nine other then-state corporations which benefited back in the 1960s.
One of those, Korea Expressway Corporation, has promised "positively" to consider the request. Others, including Korea Railroad and Korea Electric Power Corp., want more details, according to Lee.
Lee said that 226,584 Koreans claimed they or their ancestors had been mobilised as workers or soldiers by Japan.
Despite the subsequent controversy, historians say the reparations were well spent.
"But for the money from Japan, Posco would not have existed," professor Park Young-Goo, at the Busan University of Foreign Studies, told AFP.
"No country in the world at that time was prepared to lend money to South Korea to build an integrated steel plant and highways."
In another twist, Seoul's Supreme Court ruled on May 24 that Japan's Mitsubishi Heavy Industries and Nippon Steel should compensate nine conscripted Korean workers or their families.
Japan insists individual claims were settled under the 1965 deal, which saw the two countries restore diplomatic relations.
But the court ruled that the state and individuals were separate and the treaty did not affect individuals' rights to damages. It sent the cases back to lower courts for a new hearing and a calculation of the amount of compensation.