By Makiko Yamazaki and Ju-min Park

TOKYO/SEOUL (Reuters) - Japan will tighten curbs on exports of high-tech materials used in smartphone displays and chips to South Korea amid a growing dispute over South Koreans forced to work for Japanese firms during World War Two, the industry ministry said on Monday, prompting condemnation from Seoul.

Tighter export controls, to become effective on Thursday, would slow the export process by several months, hitting South Korean tech giants, such as Samsung Electronics <005930.KS>, SK Hynix <000660.KS> and LG Display <034220.KS>.

The step comes amid Tokyo's growing frustration at what it calls a lack of action by Seoul over issues stemming from its top court ruling last October that ordered Nippon Steel <5401.T> to compensate former forced laborers.

South Korea's industry minister, Sung Yun-mo, said: "We will take necessary countermeasures including filing a complaint to the (World Trade Organization)."

"Our government expressed deep regret" over Japan's tightening of its materials shipments, Sung said.

South Korea's finance minister also called a meeting to discuss plans for reacting to Japan's move, finance ministry officials said.

The South Korean foreign ministry as well summoned Japan's ambassador and called for a withdrawal of the curbs, it said.

Japan rejected South Korea's proposal last month to create a joint compensation fund for victims with contributions from both nations' companies.

"South Korea has failed to show any satisfactory measures to resolve the forced labor issue ... and severely damaged mutual trust," said an official of the Japanese Ministry of Economy, Trade and Industry.

"As trust has been lost, we cannot have a dialogue and are unable to ensure that proper export controls are being taken," he told a news briefing.

The neighbors share a bitter history dating to the Japanese colonization of the Korean peninsula from 1910 to 1945, including forced use of labor by Japanese companies and the use of comfort women, a euphemism for girls and women, many of them Korean, forced to work in its wartime brothels.

Japan, which says the issue of forced labor was fully settled in 1965 when the two countries restored diplomatic ties, has denounced the rulings and urged the launch of an arbitration panel.

The materials to be restricted are fluorinated polyimides, used in smartphone displays, as well as resists and hydrogen fluoride (HF), which is used as an etching gas to make semiconductors.