The United States has welcomed South Korea's decision to remain in its intelligence-sharing deal with Japan.

At midnight Friday, Seoul decided to "conditionally" suspend their previous move to exit the deal, known as the General Security of Military Information Agreement (GSOMIA). 

South Korea and Japan have agreed to return to negotiate export controls, said Kim You-geun, deputy director of South Korea's national security office.

The U.S. had pressured its two Asian allies to set aside their feud and maintain the GSOMIA. 

"This decision sends a positive message that like-minded allies can work through bilateral disputes," a spokeswoman for the U.S. State Department said. 

"We encourage (South Korea) and Japan to continue sincere discussions to ensure a lasting solution to historic issues."

The pact stood as a major token of South Korea and Japan's cooperation in the field of security, and it has allowed the two countries to pass intelligence without going through the U.S.

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The diplomatic thaw may also have implications for trade. As the rift worsened this year, Japan put export curbs on materials used to make semiconductors, threatening the global supply chain of chips, a pillar of the South Korean economy.

South Korean President Moon Jae-in may hold a summit with Japanese Prime Minister Shinzo Abe next month, reported the South Korean news agency Yonhap.

The two sides may also focus on substantive dialogue on bilateral issues, such as compensation for wartime forced labor and resolving a trade dispute.

On Thursday, U.S. Secretary of State Mike Pompeo and South Korean Foreign Minister Kang Kyung-wha pledged to maintain close coordination and reaffirmed the importance of the South Korea-Japan relationship, according to U.S. Department of State statement. 

The South Korea-Japan dispute has its roots in a decades-old disagreement over compensation for South Korean laborers forced to work at Japanese firms during World War Two. It has deepened this year, and upended trade between the two countries.

(With input from Reuters)