"Effects from Japan's export curbs are so far limited, but if the situation worsens, the impact could be bigger than what pricing regulations such as a tariff increase would have," the Bank of Korea said in a scheduled report to the parliament.
It also said that semiconductor exports, which account for about a fifth of the country's total shipments abroad, would likely continue to decline for the rest of this year.
In early July, Japan tightened controls on shipments to South Korea of three materials used in chips and displays in a
dispute stemming from their wartime past.
A copy of the BOK report was distributed to reporters ahead of Governor Lee Ju-yeol's testimony at a parliamentary committee, due to start at 0200 GMT.