Financial authorities say the South Korea-Japan trade row could become a serious problem if it extends for a long period of time, though it may not significantly impact the financial market in the short-term.

Financial Services Commission Vice Chairperson Sohn Byung-doo gave the assessment on Monday after chairing a meeting attended by officials from the Finance Ministry, Bank of Korea, Financial Supervisory Service, the Korea Exchange and the Korea Center for International Finance.  

Sohn said the foreign exchange market, in particular, appears to have reacted sensitively to the latest row resulting from Japan's trade restrictions, including the removal of South Korea from a "whitelist" of preferred trading partners.

He noted that Japan's moves come amid a series of unfavorable global conditions, including the U.S.-China trade dispute.  

He said it remains to be seen if such conditions will continue for an extended period, but expressed pessimism about a turnaround as overall business performance remains sluggish.  

Sohn also downplayed the likelihood of Japanese financial institutions pulling out funds from South Korea, noting no irregular activities on the part of Japanese banks.