SEOUL, South Korea — Until recently, few had heard of PNR, a company in South Korea that turns sludge from steel mills into iron. Then a 94-year-old man named Lee Chun-shik tried to settle an old debt.

Mr. Lee grew up during the Japanese occupation of Korea, and as a teenager, he was taken to Japan and forced to work for a steel maker, essentially as slave labor. Today, that steel maker is Japan’s largest, Nippon Steel & Sumitomo Metal, with assets around the world, including $9.6 million worth of shares in PNR.

Mr. Lee asked a court in South Korea to seize some of those shares as compensation for what he endured so long ago — and the court did so last month.

The ruling is now at the center of a bitter dispute that has called into question the foundation of diplomatic ties between America’s top allies in Asia, driving them apart even as Washington is trying to build a united front against China’s rise and a nuclear-armed North Korea.

At issue is a question that has strained relations since the end of World War II: Has Japan accepted full responsibility for occupying Korea and mobilizing Koreans for its war effort?

Though the two nations have bickered for decades over their painful shared history, the current falling-out may be one of the most serious yet. And it comes as the Trump administration is seen in the region as inattentive and unwilling to act as mediator.

In remarks before leaving his post last month, Lt. Gen. Jerry P. Martinez, the commander of American forces in Japan, urged the countries to resolve their differences. “The way you overcome history is through dialogue, and you look to the future to try to make things better,” he said.

As many as 7.8 million Koreans were conscripted as forced labor or soldiers during Japan’s imperial expansion before and during World War II, according to South Korean estimates. They toiled in mines and munitions factories across Asia and fought alongside Japanese troops. Women were sent to military-run brothels.

After the war, South Korea sought compensation on behalf of these workers. In the pact establishing diplomatic relations between the two nations in 1965, Japan provided $300 million in aid and $200 million in loans.

But most workers got nothing. Instead, the military dictatorship governing South Korea at the time used the bulk of the funds to build highways, dams and factories, jump-starting the country’s industrialization.

It was only after South Korea’s first democratic elections in the late 1980s and early ’90s that many workers began seeking damages, first in Japanese courts and since 2000 in South Korea.

The campaign reached a climax in October, when the Supreme Court of South Korea ordered Nippon Steel to pay $89,000 each to Mr. Lee and the families of three other plaintiffs — a landmark decision clearing the way for former laborers and their descendants to claim the local assets of Japanese companies. A lower court ordered the PNR shares seized in January.

“I am happy with the ruling, but I am sad when I think of my colleagues,” Mr. Lee said, referring to the other plaintiffs, all of whom died during the long legal battle.