The two Koreas have agreed to march together at Friday's opening ceremony under the unification flag -- a pale blue silhouette of the peninsula -- which will also be used by their combined women's ice hockey team.
The flags used at the joint team's practice match against Sweden on Sunday showed a blue dot indicating islands in the Sea of Japan controlled by South Korea, which refers to them as Dokdo.
But they are also claimed by Japan, which calls them "Takeshima", and Tokyo reacted furiously, lodging a diplomatic protest. Its chief cabinet secretary Yoshihide Suga called the flag "unacceptable".
Japanese Prime Minister Shinzo Abe is due to attend the Winter Olympics opening ceremony on Friday and Seoul backed down over the flags on Tuesday.
"Our basic stance is to respect the IOC's decision concerning the use of the Korean peninsula flag... in particular, for IOC-run events," foreign ministry spokesman Noh Kyu-duk told journalists.
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