"The intelligence report by Japan appears grounded on facts," Yonhap quoted the official as saying.

Koh Yu-hwan, a North Korea professor at Dongguk University in Seoul, told the agency that if the North was preparing to test a missile, it was likely to be an "upgraded" model.

"We could even call it a Taepodong-3 missile," he said.

'Brink of war'

Analysts say North Korea may be trying to draw the attention of the US [EPA]
In 2006, the same year North Korea tested its first nuclear device, it also test fired a Taepodong-2 missile from a launch site on the east coast of the peninsula.

But the test was considered a failure because the rocket plunged into the ocean after less than a minute of flight.

The report of the possible new test comes amid escalating tensions on the Korean peninsula, with North Korea warning the two countries are on "the brink of war".

It has blamed what it says are the confrontational policies of Lee Myung-bak, the South Korean president, for causing the downturn in relations.

Last week a statement in North Korean media said the North was cancelling all political and military agreements made with the South, considering them to be "dead".

However, some analysts believe the escalation in North Korean rhetoric is less intended to warn of imminent conflict and more designed to attract the attention of the new US president, Barack Obama, and to ensure the Korean peninsula remains a top US diplomatic priority.

'Jittery'

"Pyongyang seems jittery," Ryoo Kihl-jae, an expert at the University of North Korea Studies, told Yonhap.

He said that Kim Jong-il, the North Korean leader who reportedly suffered a stroke last summer, appeared to be pressing the new US administration to formulate its North Korea policy quickly.

On Monday the US and South Korean presidents held what was described as "substantive" telephone conversation, agreeing to step up cooperation towards ending North Korea's nuclear weapons programmes.

Robert Gibbs, the White House spokesman, said Obama and Lee "agreed to work closely as allies and through the six-party talks to achieve the verifiable elimination of North Korea's nuclear weapons".

Denuclearisation

In Seoul, presidential spokesman Lee Dong-Kwan said Obama had noted that "a series of recent developments" had led him to realise that the denuclearisation of the Korean peninsula could be achieved at an early date through improved cooperation among the six-nations involved in the talks.

The six-party talks process began in 2003 and brings together China, Japan, Russia, the US and the two Koreas.

A deal signed in February 2007 offers the North energy aid, normalised ties with the US and Japan and a permanent peace pact if it dismantles its atomic plants and hands over all nuclear weapons and material.

But the disarmament talks have become bogged down in disagreements over how to verify the North's declared nuclear activities.