(Reuters) - South Korea and the United States were on high alert for a North Korean missile launch on Thursday as the reclusive and poverty-stricken state turned its attention to celebrating the ruling Kim dynasty and appeared to tone down rhetoric of impending war.
Despite threats it will attack U.S. bases and the South in response to any hostile acts, North Korea started to welcome a stream of visitors for Monday's celebrations marking the birthday of founding father, Kim Il-sung.
North Korea has stationed as many as five medium-range missiles on its east coast, according to defense assessments made by Washington and Seoul, possibly in readiness for a test launch that would demonstrate its ability to hit U.S. bases on Guam.
"There are signs the North could fire off Musudan missiles any time soon," an unnamed intelligence source in Seoul told Yonhap news agency.
Musudan missiles are medium-range missiles that have the potential to hit U.S. bases on Guam, although it is not known whether they have been tested or can fly that far.
"But the North has been repeatedly moving its missiles in and out of a shed, which needs close monitoring."
Most observers say Pyongyang has no intention of igniting a conflict that could bring its own destruction but warn of the risks of miscalculation on the militarized Korean peninsula.
There did not appear to be any signs of panic in Seoul, the South Korean capital, and financial markets shrugged off the risk of conflict with stocks posting a third day of gains.
New South Korean President Park Geun-hye met foreign businessmen on Thursday and reassured them that the country was safe and that it was working closely with the United States and China, the North's only major diplomatic ally.
Taiwan appeared to become the first country to warn its citizens against travelling to South Korea after Pyongyang said that foreigners should leave, but hotels were reporting brisk business.
Pyongyang issued a statement that appeared to be tinged with regret over the closure of the joint Kaesong industrial zone that was shuttered when it ordered its workers out this week, terming the North-South Korean venture "the pinnacle of General Kim Jong-il's limitless love for his people and brothers".
The statement on the country's KCNA news agency blamed Park for bringing the money-spinning venture to "the brink of shutting down".
Kim Jong-il, Kim Il-sung's son, ruled North Korea until his death in December 2011. He was succeeded by Kim Jong-un, the third of his line to preside over one of the world's poorest and most heavily militarized countries.
Since taking office, the 30-year-old has staged two long- range rocket launches and a nuclear weapons test. The nuclear test in February triggered U.N. sanctions that Pyongyang has termed a hostile act and a precursor to invasion.
For over a month, Pyongyang has issued an almost daily series of threats to the United States and South Korea, most recently warning foreigners to leave the South due to an impending "thermonuclear" war.
Apart from the swipe at South Korea's new president, verbal threats appeared to fall off as KCNA listed arrivals for the upcoming birthday celebrations, naming an eclectic mix ranging from Chinese businessmen to Cold War-era enthusiasts of its socialist monarchy and official ideology of "juche", or self-reliance.
Ramon Jimenez Lopez, listed as the chairman of the Latin American Institute of the Juche Idea, and Jie Wenjiang, who it said was in charge of Hantong International freight company in Dandong, China, were among the arrivals, KCNA said.
"YEAR OF TEARS"
Reinforcing the rule of the Kim dynasty and the legitimacy of the latest Kim to hold power in Pyongyang is a key tenet of North Korea's ideology.
The Kim regime may have been given a boost by a rise in food production thanks to agricultural reforms, a Korean-language Japanese newspaper with close links to Pyongyang reported on Thursday, saying the a bigger harvest had come in 2012.
There have been reports of starvation in North Korea last year and the country experienced a famine in the 1990s. Although the newspaper report could not be independently verified, it chimed with a World Food Programme assessment released last year.
Party newspaper Rodong Sinmun said Kim Jong-un had "lifted the North Korean people out of the sea of bloody tears that has been their world in the past year" after the death of his father.
It was the first anniversary on Thursday of Kim's official ascent to power, although he became de-facto leader immediately after his father's death.
Despite the heady rhetoric from North Korea and its closure of the Kaesong zone that generated $2 billion a year in trade, Pyongyang does not appear to have placed its 1.2 million strong armed forces on high alert.
The North's rhetoric has pushed the United States, the guarantor of South Korea's security, to move more military assets into the region in response to the rising threat levels.
In Washington, U.S. Defense Secretary Chuck Hagel warned on Wednesday that the North was "skating very close to a dangerous line" with its threats and provocations, and said the United States, currently involved in military exercises with South Korea, was prepared to respond to any moves by Pyongyang.
"We have every capacity to deal with any action that North Korea would take, to protect this country and the interests of this country and our allies," Hagel told reporters at the Pentagon.
Secretary of State John Kerry will visit Seoul on Friday as part of a trip that will also take him to Beijing. He met with Russian Foreign Minister Sergei Lavrov in London and the Russians stressed that Moscow and Washington were closely aligned.
China urged "relevant parties" to resume long-stalled six-party talks, joining China, the two Koreas, the United States, Japan and Russia and aimed at reining in North Korea's nuclear ambitions.
"The hope that the Korean peninsula maintains peace and stability is the universal expectation of the international community," spokesman Hong Lei told a daily news briefing.
The Global Times, a tabloid published by the ruling Communist Party's People's Daily, said North Korea held the responsibility of preserving peace.
"Pyongyang should drop its illusions that it can make the world stay silent over its desire for nuclear arms through its hard-line stance and deceptions," it said. "We believe the North still has a chance and we regret that it has become mired in this crisis. We hope the crisis is only temporary."
Financial markets, which have fluctuated with the rise in tensions, appeared to have stabilized and the head of South Korea's central bank on Thursday announced that there was no imminent threat to Asia's fourth-largest economy.
"We will take appropriate action if the economy is affected by North Korea risks," Bank of Korea Governor Kim Choong-soo said after it left interest rates unchanged on Thursday.
Reuters
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