NORTH KOREA THREATENS 'SACRED WAR' AGAINST SOUTH AMID TENSION

PYONGYANG has warned of a 'sacred war' against Seoul as South Korean President Lee Myung-bak vowed a 'merciless counterattack' if its territory is attacked again.

Both sides were raising the rhetoric on a day South Korea launched major land and sea military exercises, prompting North Korea to denounce its richer neighbor as a warmonger.

'To counter the enemy's intentional drive to push the situation to the brink of war, our revolutionary forces are making preparations to begin a holy war at any moment necessary based on nuclear deterrent,' North Korea's KCNA news agency quoted Minister of Armed Forces Kim Yong-chun telling a rally in Pyongyang.

China, the impoverished North's only major ally, has urged dialogue to resolve the crisis and has been reluctant lay to blame, frustrating Washington and its allies which want Beijing to do more to rein in Pyongyang.

U.S. President Barack Obama is expected to press this point when his Chinese counterpart Hu Jintao visits the United States on January 19.

Chinese Foreign Ministry spokeswoman Jiang Yu, when asked about the drills, repeated Beijing's call for a resumption of the so-called six-party talks.

'The current situation on the Korean peninsula remains highly complex,' she told a regular news briefing. 'We urge parties concerned to exercise calm and restraint.'

North Korea regularly threatens to destroy the South and its major ally, the United States, and has wielded the threat of its nuclear deterrent before, despite analysts saying it has no way to launch a nuclear device.

Lee said on a tour of a South Korean forward army base overlooking North Korean territory that the South would not relax its readiness to counter any aggression by the North.

'We had believed patience would ensure peace on this land, but that was not the case,' Lee, criticized for perceived earlier weakness to North Korean attacks, told troops.

South Korea held a major land drill in the Pocheon region, between Seoul and the heavily armed demilitarized zone (DMZ) separating the two Koreas.   It also continued naval live-fire exercises 100 kilometres (60 miles) south of the maritime border with North Korea.

The drill involves a larger scale of firepower and personnel than usual for an exercise at the army training ground, a further indication that Lee wants to show the public his government can stand up to the North.

A large contingent of mechanized units operating tanks, three dozen self-propelled artillery, fighter jets and multiple rocket launchers, took part in the live-fire drill just miles from the border. It lasted just under an hour.

Lee has replaced his top defence officials with more hawkish military men, a response to criticism of his response to hostile acts from the North, including an attack on a ship in March and the shelling of Yeonpyeong island last month.

'(South Korea) is trying to hide the provocative nature toward the North of the war exercises,' the North's KCNA said earlier in a comment, calling the drills 'madcap' and 'offensive' and referring to the South Korean military as 'puppet warmongers,' an insult it frequently deploys.