South Korea on Monday unveiled a plan for resolving a long-festering dispute with Japan over wartime labor — a move hailed by Tokyo — bringing the two neighbors closer to a dramatic improvement in ties that have been clouded by years of mistrust and historical grievances.

South Korean Foreign Minister Park Jin announced the plan at a news conference, saying that funds for compensating wartime laborers under Japan's 1910-1945 colonization of the Korean Peninsula would be raised by “voluntary” private sector donations and paid to a South Korean foundation in place of Japanese companies.

“The government hopes to work with Japan, our closest neighbor, who shares the universal values of liberal democracies, market economies, rule of law and human rights amid the increasingly severe situation on the Korean Peninsula and amid the current grave international situation,” Park said in prepared remarks.