The World Trade Organization on Tuesday largely faulted South Korea in a final ruling over anti-dumping duties slapped on imports of industrial pneumatic valves imported from Japan.
The WTO's Appellate Body mostly upheld a previous ruling finding that Seoul's anti-dumping duties on Japanese pneumatic valves violated some international trade rules.
It requested that South Korea "bring its measures found ... to be inconsistent with the Anti-Dumping Agreement, into conformity with its obligations".
But it also threw out some of Japan's claims of alleged breaches.
Tokyo nonetheless hailed the ruling, saying in a statement the Appellate Body "accepted core claims of Japan".
It demanded that South Korea "sincerely and promptly correct its measures that are inconsistent with the WTO Agreement so that its unjust measures against Japanese companies will not continue".
The WTO, which aims to create a level playing field in global trade, cannot force compliance with its rulings, but may approve retaliatory measures against violators of international trade rules.
The South Korean government on Tuesday meanwhile said it planned to "actively utilise the WTO dispute settlement process to protect its national interest and solve trade disputes with foreign countries in the future."
Japan first launched its complaint with the WTO after South Korea in 2015 slapped anti-dumping duties of around 10-20 percent on the Japanese-made valves, which are used to control the flow of air in various types of industrial equipment, including in robotics and automobile assembly.
Japan's exports to South Korea of the valves are worth about 4.0 billion yen ($37 million, 34 million euros) annually, according to the Japanese trade ministry.
Tokyo estimates Seoul's anti-dumping duties will cost it a total of around 2.3 billion yen between 2015 and 2020.
Tuesday's ruling comes at a time of escalating tension between Tokyo and Seoul.
The two countries are mired in a long-running dispute over Japanese use of forced labour in South Korea during World War Two.
A series of South Korean court rulings has demanded Japanese companies compensate victims, but Tokyo says the issue was settled by a reparations package agreed decades ago.
The neighbours have been embroiled in a tit-for-tat trade war that saw them remove each other from their lists of trusted trading partners last month, raising concerns over global supply chains.
South Korean electronics giants like Samsung, LG and SK Hynics have been forced to hunt for suppliers elsewhere in the hope of reducing their dependence on Japanese manufacturers.
Parts of the Japanese economy have also seen collateral damage, including the tourism industry.
South Koreans, who were second only to Chinese as the top visitors to Japan last year, have increasingly shunned the country.
Tuesday's ruling could be among the last issued by WTO's appeals branch.
The United States has blocked the naming of new members to the appellate panel part of the WTO's Dispute Settlement Body, which will likely see the system grind to a halt by the end of the year.