By Hyonhee Shin and Linda Sieg
SEOUL/TOKYO (Reuters) - On the anniversary of Japan's World War Two surrender, South Korea's president on Thursday urged Japan to contemplate its wartime past and offered to engage in talks to repair strained ties, while Japan pledged to never repeat the horrors of war.
Relations between Japan and South Korea are arguably at their lowest ebb since they normalised ties in 1965, strained over the issue of South Korean forced labour during World War Two and a bitter trade row.
In a speech marking Korea's independence from Japanese rule, Moon toned down his recent harsh rhetoric towards Japan.
"We hope that Japan will play a leading role together in facilitating peace and prosperity in East Asia while it contemplates a past that brought misfortune to its neighbouring countries," Moon said in a nationally televised address.
"Better late than never: if Japan chooses the path of dialogue and cooperation, we will gladly join hands."
Japanese Prime Minister Shinzo Abe on Thursday sent a ritual monetary offering to the controversial Yasukuni shrine for war dead in Tokyo. He did not visit in person, an act which would have sparked a heated reaction from Seoul.
Seoul's foreign ministry expressed "deep concerns" over Abe sending the offering to a shrine that "beautifies Japan's colonial pillage and aggressive war".
Bitter memories of Japan's 1910-1945 colonisation of Korea have long plagued bilateral ties.
Abe, speaking at a ceremony honouring war dead, said the country had engraved the "lessons of history deep in our hearts", and pledged never to repeat the devastation of war.
"To create a peaceful new era full of hope, we will spare no effort in working with the international community," Abe said.
DIPLOMACY BACK ON TRACK?
Bilateral relations deteriorated after South Korea's Supreme Court last year ordered Japanese companies to compensate some wartime forced labourers. Tokyo says the matter was settled by a 1965 treaty normalising ties.
The chill deepened when Japan ended South Korea's fast-track trade status this month, prompting Seoul to follow suit.
Tokyo has cited security concerns for its tightening of controls on exports to South Korea and denied it was retaliation over the forced labour feud. On Thursday, Japan repeated calls for Seoul to explain its revocation of Japan's preferential export status.
Japanese and South Korean vice foreign ministers are likely to meet this week in Guam to discuss the issue, Japanese and South Korean media have reported.
Strained ties between the two key U.S. allies have threatened security cooperation in the face of North Korea's threat and China's rise, worrying Washington.
"Recent escalation between South Korea and Japan demonstrated a lack of appreciation for the economic interests at stake, for the other side's domestic politics, and for the severe regional security situation," said Leif-Eric Easley, who teaches international relations at Ewha University in Seoul.
"Moon's references to Japan highlighted the importance of economic cooperation, and left the door open for diplomacy."
'BITTER AND FURIOUS'
In downtown Seoul, thousands of South Koreans in rain coats including some victims of forced labour staged a massive rally that involved a march towards the Japanese Embassy.
They chanted "Fight!" and "Compensate!" while holding signs saying "Condemn Abe's regime" or "Apologise, compensate for forced conscription."
"I am bitter and furious just thinking about the hardship I went through when I was in Japan," said Lee Choon-shik, 95, who was forced to work for Mitsubishi Heavy Industries Ltd in 1941 at age 17.
Yang Geum-deuk, 90, said she was given barely any food and often beaten by Japanese authorities for not quickly using the bathroom while at Mitsubishi.
"We Koreans were treated as animals," Yang said, showing a banner saying "No Abe, No Mitsubishi." "But we're strong now ... and my wish is to hear a word of apology from Abe, as the world knows how we suffered in Japan."
Japan's new emperor Naruhito, speaking at the same ceremony as Abe, expressed "deep remorse" over the country's wartime past and prayed for global peace in remarks that echoed those of his father, Akihito.
Naruhito, 59, became Japan's first monarch born after the war when he inherited the throne in May following Akihito's abdication.
Past visits by Japanese leaders to Yasukuni have outraged South Korea because the shrine honours 14 Japanese wartime leaders convicted as war criminals.
Abe has only visited there once since taking office in 2012 but has regularly sent offerings on major occasions.
Ruling party lawmaker Tomomi Inada, a former defence minister and now special aide to Abe, made the shrine offering on behalf of the premier, whom she quoted as thanking those who gave their lives for their homeland and contributed to Japan’s peace and prosperity, domestic media said.
A steady stream of visitors paid their respects at Yasukuni under partly cloudy skies as temperatures soared. Groups including members of a tiny nationalist party and critics of the U.S. military presence on Japan's southern Okinawa island gathered near the entrance.
Police, some in anti-riot gear, patrolled nearby.
A sign inside the grounds said activities such as hoisting flags, demonstrating or destroying property were banned.
"The people enshrined here fought for Japan and we have come to express our gratitude and to show them our resolve to build a better Japan," said Yoshiko Matsuura, 71, a former ward assembly member from Tokyo visiting with other local politicians.
(Additional reporting by Kiyoshi Takenaka, Tim Kelly, Chris Gallagher and Elaine Lies in TOKYO and Daewoung Kim and Youngseo Choi in SEOUL; Editing by Michael Perry)