Japan had planned on sending its naval destroyer to the five-day event at a military port on Jeju island that begins on Wednesday.

But newly appointed defence minister Takeshi Iwaya said Japan "will refrain from joining the international fleet review," a ministry spokesman told AFP.

The cancellation comes amid a dispute over Japan's plan to fly the "Rising Sun" flag -- a white flag depicting a red disc with 16 rays -- which has been an ensign for Japan's Maritime Self-Defence Forces since 1954.

But in South Korea, the flag is a symbol of Japan's military aggression during World War II and a bitter reminder of the country's 1910-45 colonial rule over the peninsula.

South Korea's navy had earlier asked all participating 14 countries -- including Japan -- to display only their national flags and the South Korean flag on their vessels.

Tokyo has dismissed the request, arguing that it is mandatory to fly the "rising sun" flag under Japanese law.

The South Korean government "has conveyed through various channels on the need to positively consider the national sentiment on this issue and have exchanged opinions with the Japanese side," the South Korean navy said in a statement on Friday.

Japan's absence in the international fleet review is "regrettable and the decision should not affect maintaining the promising ties between the two countries' Navies," they said.

The government source told Yonhap news agency that the Japanese military plans to send a delegation to a symposium held on the sidelines of the event.