WRAPUP 1-Embassies staying put in North Korea despite tension
* Embassies appearing to stay put in North Korea
* No sign of tension in South Korea
* Analysts suggest North may start to focus more on economy than military
By Jane Chung
SEOUL, April 6 (Reuters) - Staff at embassies in North Korea appeared to be remaining in place on Saturday despite an appeal by authorities in Pyongyang for diplomats to consider leaving because of heightened tension after weeks of bellicose exchanges.
North Korean authorities told diplomatic missions they could not guarantee their safety from next Wednesday - after declaring that conflict was inevitable amid joint U.S.-South Korean military exercises due to last until the end of the month.
Whatever the atmosphere in Pyongyang, the rain-soaked South Korean capital, Seoul, was calm. Traffic moved normally through the city centre, busy with Saturday shoppers.
South Korea's Yonhap news agency quoted a government official as saying diplomats were disregarding the suggestion they might leave the country.
"We don't believe there's any foreign mission about to leave Pyongyang," the unidentified official was quoted as saying. "Most foreign governments view the North Korean message as a way of ratcheting up tension on the Korean peninsula."
North Korea has been angry since new U.N. sanctions were imposed following its third nuclear weapons test in February. Its rage has apparently been compounded by joint U.S.-South Korean military exercises that began on March 1.
China's Xinhua news agency on Friday had quoted the North's Foreign Ministry as saying the issue was no longer whether but when a war would break out.
Most countries saw the appeal to the missions as little more than strident rhetoric after weeks of threatening to launch a nuclear strike on the United States and declarations of war against the South.
But Russia said it was "seriously studying" the request.
A South Korean government official expressed bewilderment.
"It's hard to define what is its real intention," said the official, who asked not to be identified. "But it might have intensified these threats to strengthen the regime internally or to respond to the international community."
The United Nations said its humanitarian workers remained active across North Korea. Secretary General Ban Ki-Moon, however, remained "deeply concerned" about tensions, heightened since the imposition of U.N. sanctions against the North for its third nuclear arms test last in February.
The appeal to diplomats followed news reports in the South that North Korea, under its 30-year-old leader Kim Jong-un, had moved two medium-range missiles to a location on its east coast. That prompted the White House to say that Washington would "not be surprised" if the North staged another missile test.
Kim Jong-un is the third member of his dynasty to rule North Korea. He took over in December 2011 after the death of his father, Kim Jong-il, who staged confrontations with South Korea and the United States throughout his 17-year rule.
North Korea has always condemned the exercises held by U.S. forces and their South Korean allies. But its comments have been especially vitriolic this year as the United States dispatched B-2 bombers from its home bases to stage mock runs.
"MADCAP NUCLEAR WAR"
North Korea's government daily newspaper said tension remained high because the United States was "waging madcap nuclear war manoeuvres".
"This is aimed at igniting a nuclear war against it through a pre-emptive strike," the Minju Joson said in a commentary. "The prevailing situation proves that a new war, a nuclear war, is imminent on the peninsula."
A television documentary broadcast on Friday quoted North Korean leader Kim as saying, during a provincial tour last month, that the country needed to "absolutely guarantee the quality of our artillery and shells to ensure a rapid pre-emptive attack on our enemies".
But some commentators examining the outcome of meetings in Pyongyang last week - of the ruling Workers' Party and of the rubber-stamp legislature - concluded that Kim and his leadership were more concerned with economic than military issues.
Internet site 38 North, which specialises in North Korean affairs, cited the reappointment of reformer Pak Pong Ju as prime minister, the limited titles given to top military and security officials and the naming of a woman to a senior party post.
"These personnel appointments make a great deal of sense in the context of Pyongyang's declarations ... that its economic policy will be modified by introducing systemic reforms while also continuing the development of nuclear weapons," 38 North commentator Michael Madden wrote.
"(They) appear to be important steps in moving key economic development products and production away from the control of the military to the party and government."
North Korea has not shut down one symbol of joint cooperation, the Kaesong industrial zone just inside its border. But last week it prevented South Koreans from entering the complex and about 100 of them who have since remained were due to return home on Saturday, leaving a further 500 there.
The barrage of North Korean threats has created jitters in South Korea's financial markets, with a top official warning a policy meeting on Friday of long-term effects.
Shares slid on Friday, but analysts said much of the decline was linked to the Bank of Japan's monetary easing policies and one analyst said further major falls were unlikely.
"In a sense, for now the yen is of greater concern than the North Korea risk," said Ko Seunghee, a market analyst at SK Securities. "There is a sense that the KOSPI (index) will not fall sharply or drop below the 1,900 level unless big news about North Korea breaks out."
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