The logos of Line and Yahoo! Japan are seen in this November 2019 file photo. AP-Yonhap

The prospect of a diplomatic feud between Korea and Japan is looming large as Tokyo began trying to exclude Naver from its joint management with SoftBank of Line mobile messenger app, according to industry and government officials, Sunday.

Japan's Ministry of Internal Affairs and Communication said in a press release on March 5 that it asked LY Corp., the messenger app's Tokyo-headquartered operator, to reconsider its financial reliance on Naver. This came after a massive leakage of Line users' personal information last November via Naver's cloud server in Korea.

Following the Japanese government's non-binding administrative guidance, SoftBank reportedly started talks with Naver to acquire part of the Korean IT firm's 50 percent stake in A Holdings, their joint venture which owns a 64.5 percent stake in LY Corp. In 2019, Naver and SoftBank announced their joint management of Line and Yahoo! Japan, each of which had been under respective control of the Korean IT firm and the Japanese IT company.

Because SoftBank's proposed acquisition may lead Naver to lose its control over Line, Rep. Yoon Sang-hyun of the ruling People Power Party denounced Japan's guidance as an unreasonable and excessive measure. He raised concerns about a diplomatic feud between Korea and Japan, which have improved their ties under the Yoon Suk Yeol and Fumio Kishida administrations.

"Unless Japan intends to exclude the Korean firm from managing the messenger app used by over 96 million Japanese a month, under the pretext of cybersecurity, it should retract the unfair measure immediately," the lawmaker wrote on social media, Thursday.

He urged both countries to communicate through various channels, so that this issue will not develop into a diplomatic feud.

Korea's foreign and ICT ministries vowed to talk with Naver regarding this matter.

A foreign ministry official told reporters that the Korean government has maintained a firm stance that there should be no discriminative measures against a Korean company.

Lawmaker-elect Cho Kuk, head of the minor opposition Rebuilding Korea Party, criticized the Yoon administration on Saturday for staying quiet about Japan's apparent attempt to strip Naver of its control of Line.

Kim Jun-hyeong and Lee Hai-min, lawmakers-elect of the party, also said in a press conference on Friday that the Korean government should take stern measures to prevent the Japanese government from mistreating a Korean company.

Naver declined to comment on this issue, as nothing has been decided regarding the sale of its stake in LY Corp. However, LY Corp. said in a statement that it asked Naver to review their relationship.

Korea Investment & Securities analyst Jung Ho-yoon said in a report that Naver has remained reluctant to sell its stake, so it will take a significant amount of time to reach a conclusion regarding this matter.

"If Naver lowers its stake in LY Corp., it will miss benefits from the growth of Japan's internet market," the analyst said.