Japan has apologised and agreed to pay compensation to South Korea over its use of so-called "comfort women" during the Second World War.
The deal, intended to end decades of animosity, includes the payment of one billion Japanese yen (pounds 6?million) to help support the former sex slaves, only 46 of whom are still alive.
Shinzo Abe, the Japanese prime minister whose government has previously been accused of whitewashing wartime atrocities, said: "Japan and South Korea will welcome a new era." However, the deal received a mixed reaction from survivors and is likely to face some opposition in both countries.
Up to 200,000 women and young girls, many Korean but also from China, the Philippines and what is now Indonesia, are estimated to have been sexually enslaved by Japan during the war.
They were forced to serve officers and soldiers, often 25 to 30 a day. Many died after being raped repeatedly and survivors were often left infertile as a result of sexual trauma and diseases.
Pressure was building to resolve the issue before the last of them died.
Japan wants South Korea to remove a statue of a barefoot girl, symbolising the women, from outside the Japanese embassy in Seoul. It was installed there four years ago by the city council. Mr Abe spoke after a phone call with Park Geun-Hye, South Korea's president, who has called the issue the "greatest stumbling block" to friendlier ties.
He repeated an apology made last August, 70 years after the end of the war. "I said [then] that Japan has repeatedly expressed remorse and apologised for its actions during the war. I stand by that statement," he said.
Yun Byung-Se, the South Korean foreign minister, said the deal would be "final and irreversible" as long as Japan fulfilled its responsibilities. He promised to try to get the statue removed.
At a joint news conference, Fumio Kishida, the Japanese foreign minister, acknowledged that South Korean sex-slaves had borne "deep scars to their honour and dignity".
One former comfort woman said yesterday that she would follow her government's lead, but another, Lee Yong-su, 88, was angry that Tokyo did not consider the money to be formal compensation. "Isn't it natural to make legal compensation if they commit a crime?" Ms Lee asked.
Japan had long maintained that a 1965 pact involving a payment of $800?million in grants or loans to its former colony settled the matter, but Seoul says the treaty did not cover compensation for victims of wartime crimes against humanity.
In 1993, Japan expressed "sincere apologies and remorse" to those "who suffered immeasurable pain and incurable physical and psychological wounds as comfort women".
Michael Cucek, a politics professor at Tokyo's Waseda University, said the agreement was struck after pressure from America. "The far-Right in Japan is going to go bananas, most likely, whereas South Korea's liberals are likely to call for president Park to resign," he said.