Japan and South Korea are considering settling a dispute over wartime labor compensation and other pending bilateral issues through a "package," amid growing momentum toward improving ties, a diplomatic source has said.

If Seoul decides to ensure compensation payment to Korean laborers through a government-backed foundation instead of asking Japanese companies to do so, Japan would lift restrictions on certain tech exports to South Korea and agree on the resumption of reciprocal visits by the countries' leaders, the source said Saturday.

According to South Korea's JoongAng Ilbo daily and the Yonhap news agency, Seoul could formally announce the solution as early as Monday.