When it comes to South Korea and Japan, historical disputes have long clouded the relationship. The two countries have not had a state visit since 2011 because they couldn’t resolve territorial claims over a set of islets. They’ve argued vehemently over the Korean women who were forced into sexual slavery for Japan’s wartime military.

But South Korea appears ready to make nice.

In one of the most significant moves to improve ties between the two countries, the government of South Korea’s president, Yoon Suk Yeol, announced on Monday that South Korea would no longer demand that Japanese companies compensate their Korean victims of forced labor during World War II. Instead, Seoul will create a government-run fund that it will use to pay the victims directly.

The move was seen as a clear indication that improving relations had become a greater priority between Seoul and Tokyo as Washington urged its two most steadfast allies in Asia to work closer together to help it face off with an increasingly assertive China and North Korea. President Biden called the deal “a groundbreaking new chapter of cooperation and partnership between two of the United States’ closest allies.”

Victims and their supporters in South Korea described the announcement as a “humiliating” concession made by Mr. Yoon in his overzealous drive to please Washington and improve ties with Japan, which colonized Korea from 1910 to 1945.

Their main concern is that the money would not come directly from Japanese companies such as Mitsubishi Heavy Industries and Nippon Steel, as stipulated by a 2018 South Korean Supreme Court decision. Both companies were among the Japanese businesses that relied on Korean forced labor during the war and were named in the lawsuit brought before the Supreme Court. South Korea hoped that Japanese companies would contribute to its fund, adding that Tokyo would not oppose if they made voluntary donations.

“I am not going to accept money even if I have to starve,” Yang Geum-deok, 94, one of the victims, told reporters on Monday, saying that she rejected the government’s solution because it was not compensation from Japan.