Waving banners and signs and chanting anti-Japan slogans, thousands of South Koreans have marched in Seoul to express their anger at Japan's decision to downgrade South Korea's trade status amid an escalating diplomatic row.

Huge crowds swarmed the streets in front of the Japanese Embassy on Saturday, carrying signs that read "Boycott Japan'' and "No Abe,'' referring to Japanese Prime Minister Shinzo Abe.

The protest came a day after Japan's Cabinet approved the removal of South Korea from a list of countries with preferential trade status, which would require Japanese companies to apply for case-by-case approvals for exports to South Korea of hundreds of items deemed sensitive.