"We can't rule out the possibility that the situation would be prolonged, despite our diplomatic efforts to resolve the issue", President Moon Jae-in said at a meeting with executives from South Korea's top 30 conglomerates. Lee may call on the Japanese businesses to lean on their government to relax the export restrictions.
Japan pushed back on Tuesday against calls from South Korea to scrap restrictions on high-tech exports to its Asian neighbor, as a diplomatic row over forced wartime labor escalates between the two key USA allies.
South Korea denounced the Japanese measure as going against the spirit of free trade and demanded its withdrawal at a meeting of the World Trade Organization in Geneva, Switzerland, later in the day.
Tokyo last week tightened the approval process for Japanese shipments of photoresists and other sensitive materials to South Korean companies.
The sanctions enforce strict restrictions on the export of three key items to South Korea.More news: Three Leads Have Been Cast In The New 'The Walking Dead' Spin-Off
The Japanese government is also seeking consultation on whether South Korea should be removed from its "white country list".
Samsung Electronics is the world's largest memory semiconductor maker, with its chips accounting for some 20% of South Korean exports.
Analysts say the Japanese measure won't have a meaningful impact immediately on South Korean chipmakers Samsung Electronics and SK Hynix, which both have sufficient supplies of the materials for now, given the slowdown in demand for semiconductors.
They haven't elaborated on the alleged security risks, but Japanese Prime Minister Shinzo Abe and his ultra-conservative aides recently raised suspicion of illegal transfers of sensitive materials from South Korea to North Korea.
Seoul's foreign affairs minister Kang Kyung-wha and Pompeo spoke over the phone just hours ago, where they discussed Japan's export restrictions on South Korea.More news: Bank of Canada head expected to hold interest rates steady
Tokyo has also said the bilateral relationship of trust has been "significantly undermined", while rejecting the charge that the measure is in retaliation for Seoul's handling of a months-long dispute over compensation for wartime labor.
Sung Yun-mo, the South Korean industry minister, told a press conference on Tuesday that the government has "found no evidence" that banned technology or materials are being shared with North Korea and accused Japan of "making groundless allegations". "Is that a problem from the standpoint of the WTO?"
The latest dispute stems from a South Korean court ruling past year that ordered Nippon Steel Corp.to compensate former forced laborers.
The main opposition Liberty Korea Party, which had until now focused on Moon administration's Japan policies, is now linking the issue to South Korea-US relations.More news: Biden apologizes for comments on segregationist Democrats after criticism