CARBIS BAY, ENGLAND (BLOOMBERG, REUTERS) - It was supposed to be another sign of Mr Joe Biden bringing together United States allies left adrift under four years of Mr Donald Trump: The leaders of Japan and South Korea sitting down for a meeting at the Group of Seven (G-7) summit.

Yet Japanese Prime Minister Yoshihide Suga and South Korean President Moon Jae-in failed to hold the first substantive direct talks between the leaders of the oft-sparring neighbours since December 2019, only exchanging greetings before the start of one of the formal meetings.

Mr Suga later said there could not be progress unless Seoul changed its ways on wartime labour issues.

"We are not in that environment because we cannot keep promises made between countries," Mr Suga was quoted as saying by the Nikkei newspaper. "The problems of former workers and the comfort women has not been resolved."

Mr Moon said on Twitter "it was regrettable" that the exchange of greetings at the G-7 could not be followed through by a meeting, adding it could have "served as a new beginning in terms of South Korea-Japan relations".

The ongoing rift shows the difficulties Mr Biden faces in mending frayed ties between the two allies who host the bulk of America's troops in Asia and are key to securing supply chains for items in the US's wider strategic fight against China.

Mr Biden has also sought their help as he undertakes a new strategy to end North Korea's nuclear programme, which he has called a serious threat to America and the world.

Mr Biden has met both leaders separately at the White House in the past few months, his first two in-person summits with foreign leaders. There was some talk that all three would sit down for a trilateral meeting, but that also failed to materialise.

Mr Moon is seeking to visit Tokyo when it hosts the Olympics next month and meet Mr Suga at that time, Japan's Yomiuri newspaper reported on Tuesday without attribution.

But both countries denied the media report on Tuesday.

"There is no truth to that report," chief Cabinet secretary Katsunobu Kato told a news conference, declining to comment further.

A South Korean government official said: "We wish a successful Olympics but have no comment on whether President Moon will visit Tokyo."

Japanese organisers and the International Olympic Committee are still working out whether foreign dignitaries will be allowed to attend the games, which will have tough measures in place to prevent the spread of the coronavirus.

Japan has been angered by a series of South Korean court decisions since late 2018 demanding some of its biggest firms pay compensation to Koreans conscripted during the 1910 to 1945 colonial period to work at Japanese factories and mines, often in brutal conditions.

Tokyo said all such claims were "settled completely and finally" at the time of a 1965 treaty that set up basic ties, while the Moon government has argued that victims still have the right to file individual claims.

Last week, a South Korean court dismissed a lawsuit brought on behalf of 85 former Korean labourers and their families against 16 Japanese companies, saying they did not have legal rights to seek damages.

The two sides could not even agree on why the meeting at the G-7 did not take place.

The Seoul-based Yonhap News Agency on Monday quoted an unnamed South Korean Foreign Ministry official as saying Japan broke a tentative agreement for the two leaders to have a longer meeting. But when the South Korean side tried to follow up, they received no response from Japanese officials, the report said.

That official told Yonhap that Japan did not want to talk because of Seoul's plans to hold military drills Tuesday on and around islets that Koreans call Dokdo, which are claimed by both countries but controlled by South Korea.

Previous drills around the islands that Japan calls Takeshima have been met with protests from Tokyo and caused strains in ties.

Mr Kato, the Japanese government's top spokesman, denied there was any tentative agreement for a meeting, adding at a news briefing on Monday such a report was "extremely regrettable". He also said Tokyo has called on Seoul to cancel the military exercises.

Whatever the situation may actually be, it's a problem that isn't going away for Mr Biden.