The move came amid expectations that Seoul and Tokyo will ramp up efforts to resolve the issue after the South decided last week to "conditionally" suspend the termination of its military intelligence-sharing pact with Japan.
Parliamentary officials described a draft of the bill to victims of the forced labor at a meeting on Monday.
It appears to be a step forward from an earlier proposal by the president. Moon put forward an idea to set up a fund to be participated in by companies and citizens of the two countries during his trip to Japan earlier this month.
|National Assembly Speaker Moon Hee-sang (Yonhap)|
The draft of the bill calls for providing a total of 300 billion won ($255 million) in compensation to 1,500 victims of forced labor during Tokyo's 1910-45 colonial rule of the Korean Peninsula.
An existing foundation designed to support forced labor victims will be upgraded to one that comprehensively covers compensation for the wartime laborers and victims of Japan's wartime sex enslavement.
The fund will be created by voluntary contributions from companies and people of the two countries. It will also use 6 billion won that was left over from a now-dissolved Japan-funded foundation on Tokyo's wartime use of sex slavery.
It is not immediately clear whether forced labor victims will accept Moon's idea.
Moon's idea follows the example of Germany's compensation for forced labor under the Nazis. The country set up a foundation to compensate forced laborers with contributions by the federal government and 6,000 companies.
Diplomatic tensions between Seoul and Tokyo have intensified since Japan imposed export curbs against South Korea in July in apparent retaliation for the top South Korean court's rulings on the wartime forced labor issue.
Tokyo has reacted angrily to the 2018 rulings, which ordered Japanese firms to compensate the Korean victims. It claims all reparation issues related to Japan's 1910-45 colonization of Korea were settled in a 1965 state-to-state accord on normalizing diplomatic ties.
Moon plans to meet with lawmakers from rival parties later in the day to discuss the bill.
"Details of the bill could be subject to change as it will take into account various opinions," an aide to Moon said. (Yonhap)