The decision comes with the countries at loggerheads following a run of South Korean court rulings against Japanese firms, requiring them to pay for forced labour during World War II.

"Maintaining this agreement, which was signed to facilitate the exchange of sensitive military information, does not serve our national interest," said Kim You-geun, a national security official at Seoul's presidential Blue House.

In a series of tit-for-tat measures, earlier this month Japan had removed South Korea from a so-called "white list" of countries that receive preferential export treatment.

Tokyo had done so citing security concerns and a loss of trust with South Korea, but did not provide "concrete evidence to support those allegations", said Kim.

This caused "fundamental changes" to the nature of defence cooperation, he added.

The end of the General Security of Military Information Agreement (GSOMIA) marks a fresh low point in relations between the two democracies and is likely to be seen with dismay in Washington.

"I have to say the decision to end the pact by the South Korean government is a complete misjudgement of the current regional security environment and it is extremely regrettable," Japanese Foreign Minister Taro Kono said in a statement later on Thursday.

"We cannot accept the claims by the South Korean side and we will strongly protest against the South Korean government," Kono said, adding that Tokyo had summoned the South Korean ambassador.

Both Japan and South Korea are market economies and US allies faced with an overbearing China and nuclear-armed North Korea.

But their bilateral relations continue to be heavily affected by Japan's colonial rule of the Korean peninsula from 1910 to 1945.

The pair's worst squabble in years, which has seen many South Koreans boycotting Japanese goods and trips there, has already alarmed Washington.

US Secretary of State Mike Pompeo held trilateral talks with his Japanese and South Korean counterparts this month in Bangkok.

However the brief meeting appeared to have been frosty as the trio -- with Pompeo in the middle -- did not speak or shake hands when they posed for photos afterwards.

- 'Historical dispute' -

The termination of the military pact comes after Seoul announced earlier this month it would remove Tokyo from its list of trusted trading partners, reciprocating an identical decision by Japan.

That followed Tokyo's imposition last month of tough restrictions on exports of chemicals used for semiconductors and displays crucial to South Korean tech titans including Samsung.

On Thursday Seoul made it clear it believes Tokyo's export restrictions are motivated by "historical dispute".

The South Korean government "had to reconsider the effectiveness of GSOMIA as Japan has applied historical issues to the security matter", an unnamed presidential official told reporters.

The dispute has raised concerns over potential implications for the countries' security cooperation in the face of North Korean missile tests, and the possible impact on global supply chains.

The intelligence pact was signed in November 2016 with Washington's backing in response to Pyongyang's missile launches and nuclear tests, to better coordinate the gathering of information about the reclusive state.

The accord had been renewed every year and Seoul's decision to end it comes as a surprise, as the country was largely expected to maintain security cooperation with Japan despite the ongoing row.