Seoul (Financial Times) -- South Korean grocers and corner shop owners have issued an ultimatum to Japan: end your claim to a disputed set of islands in the East Sea or face a national boycott of your products.

The boycott, which is expected to target brands such as Mild Seven cigarettes and Asahi beer, is the first sign that the dispute over the South Korean-controlled islands, known in Korea as the Dokdo but in Japan as Takeshima, could hit economic ties between the two neighbours.

The association of small merchants, which has a membership of about 4m corner shop owners, strongly condemned Japan's new government for holding events last Friday to commemorate "Takeshima Day", which marks the day in 1905 that Japan incorporated some barren islets located between the two countries into its territory.

"It is an international provocation, which we can no longer tolerate," the Save Local Stores Alliance said in a joint statement with some civic groups. "We will continue this boycott of all Japanese products until Japan repents its past wrongdoing and stops its sovereignty claims to Dokdo."

The boycott campaign, South Korea's first nationwide effort against Japanese products, is scheduled to start on March 1 and will focus on tobacco and alcohol brands but, say organisers, will also target other Japanese products ranging from Nikon cameras to Uniqlo clothes and cars made by Toyota and Honda, with civic groups urging Korean consumers to refuse to buy such products.

South Korea's presidential office declined to comment on the retailers' threat. Meanwhile, Park Geun-hye, president, met Taro Aso, Japan's finance minister, and discussed bilateral relations after her inauguration on Monday.

Previous boycott efforts, organised by civic groups, have had limited impact. However, the organisers claim the corner shops and restaurants account for about 80 per cent of sales of Japanese tobacco and alcohol products in South Korea.

The move against Japan comes as the two countries try to improve bilateral relations, strained after South Korea's former President Lee Myung-bak visited the disputed islands. Since Mr Lee's visit, Seoul has put off signing an agreement to share sensitive military information with Japan and Japan has cut back the size of a currency-swap agreement with Seoul aimed at stabilising the Korean won in case of external shocks.

The boycott campaign comes after Japan suffered substantial economic damage in its trade with China due to territorial disputes over a group of Japanese-held islands in the East China Sea, known as Senkaku in Japan and Diaoyu in China.

Masaaki Kanno, chief economist at JPMorgan, said the impact would not be as severe as that of last year's "more serious" flare-up with China. Fast Retailing, which runs the clothing chain Uniqlo, said it was disappointed by the boycott and would see how the situation develops.

Additional reporting by Ben McLannahan in Tokyo