The Supreme Court ordered Nippon Steel & Sumitomo Metal Corp to pay 100 million won ($87,700) to each of the four plaintiffs.
The court rejected Nippon Steel & Sumitomo Metal's stance that the issue of compensation for forced labor had been settled by the 1965 treaty.
Following the day's verdict, other South Korean courts are expected to rule in favor of such people in over 10 ongoing similar lawsuits, sources familiar with the situation said. Kono said Tokyo will weigh "every option", including taking the matter to an worldwide court unless appropriate action is taken by Korea immediately.
The Japanese government will weigh "every option", including taking the matter to an worldwide court depending on how the South Korean government responds, according to Kono.
"It's an unbelievable judgement from the perspective of global law", Prime Minister Shinzo Abe told the Diet.
Two South Koreans initially brought the case to a Japanese court in 1997, seeking payment for damages and unpaid wages for forced labour at steel mills owned by a predecessor company of Nippon Steel.
South Korean President Moon Jae-in, who once represented South Korean forced laborers as a lawyer in the 2000s, said after taking office previous year said that the 1965 treaty can not prevent individuals from exercising their rights for damage compensation. The court found that the Japanese court's decision was based on the disputable premise that its 1910-45 colonial rule of Korea was legal, which is contrary to the South Korean Constitution. The Supreme Court in 2012 overturned rulings by lower courts that denied compensation for the plaintiffs and sent the case back to the Seoul High Court, which in 2013 ruled that Nippon Steel compensate the plaintiffs 100 million won each.
South Korea commented more cautiously, with its foreign ministry saying that Tokyo and Seoul "should gather wisdom" to prevent the ruling from harming their relations. On Seoul-Tokyo relations, the prime minister said he hoped bilateral ties "develop future-orientedly".
Seoul and Tokyo's bitter disputes over history, including issues surrounding South Korean women forced into wartime sexual slavery, have complicated Washington's efforts to strengthen trilateral cooperation to deal with North Korea's nuclear threat and China's growing influence in the region.
South Korean President Moon Jae-in has hailed new relations with the North in recent months, but others remain critical of the military agreements between Seoul and Pyongyang.
There are 14 similar damages lawsuits pending in court against firms including Mitsubishi Heavy Industries Ltd and Mitsui Mining and Smelting Co Ltd.
The Japanese government has maintained that the right to seek compensation was terminated under a 1965 bilateral treaty signed between Japan and South Korea.
The ruling will also change how Seoul handles Tokyo's comfort women scandal, where Japanese Imperial soldiers forced almost 400,000 Korean, Chinese, and Filipino women into prostitution, causing further tensions after Japan funded the Reconciliation and Healing Foundation for victims.