The exchange of fire on Yeonpyeong island in November further raised tension levels on the Korean peninsula [AFP]

North Korea has lowered the standby status of its military units on the west coast, prompting a reciprocal move by South Korea and US forces.

South Korea's Yonhap news agency, citing officials, said on Friday the moves came as Seoul held the latest round of war games to simulate an infiltration by North Korean troops across the disputed Yellow Sea border.

The North Korean units had been on special standby but now appear to be on routine operations, the agency reported.

"We're looking at whether these steps are linked to the conciliatory gestures coming from the North with its offer for talks," Yonhap quoted a government source as saying.

South Korea's defence ministry and an official at the Combined Forces Command declined to confirm the report, saying only that they "do not discuss intelligence matters".

Last year tension reached some of its highest levels since the 1950-53 Korean War when a South Korean navy ship was sunk by a torpedo attack which Seoul blamed on the North, and the North bombed the South's Yeonpyeong island in November.

North Korea on Wednesday called for unconditional talks to improve ties with the South but Seoul rejected the offer as "propaganda" it did not take seriously.

Amid the more positive tone, Japan's foreign minister called for renewed dialogue on the divided Korean peninsula but said the North should first take "concrete actions" to lower tensions.

"The nuclear and missile development issue of DPRK [North Korea] is a cause for major concern," Seiji Maehara said in a speech to a think-tank in Washington on Thursday.

The lifting of the alert comes as Stephen Bosworth, the US envoy on North Korea, wrapped up his Asian tour aimed at co-ordinating future steps toward ending Pyongyang's nuclear weapons programme.