North Korea orders troops on war footing after exchange of fire with South

North Korean leader Kim Jong Un ordered his troops onto a war footing from 5 p.m on Friday after his government issued an ultimatum to Seoul to halt anti-Pyongyang propaganda broadcasts by Saturday afternoon or face military action.

South Korean Vice Defence Minister Baek Seung-joo said it was likely the North would fire at some of the 11 sites where the loudspeakers are set up on the South's side of the Demilitarised Zone (DMZ) separating the countries.

Tension escalated on Thursday when North Korea fired four shells into South Korea, according to Seoul, in apparent protest against the broadcasts. The South fired back 29 artillery shells. Pyongyang accused the South of inventing a pretext to fire into the North.

Both sides said there were no casualties or damage in their territory, an indication that the rounds were just warning shots.

"The fact that both sides' shells didn't damage anything means they did not want to spread an armed clash. There is always a chance for war, but that chance is very, very low," said Yang Moo-jin, professor at the University of North Korean Studies in Seoul.

Since the 1950-53 Korean War ended in a truce, not a peace treaty, Pyongyang and Seoul have often exchanged threats, and dozens of soldiers have been killed, yet the two sides have always pulled back from all-out war.

But the renewed hostility is a further blow to South Korean President Park Geun-hye's efforts to improve North-South ties, which have been virtually frozen since the deadly 2010 sinking of a South Korean navy ship, which Seoul blames on Pyongyang.

Park cancelled an event on Friday and made a visit to a military command post, dressed in army camouflage.

SOUTH SAYS WON'T STOP BROADCASTS

The North's shelling came after it had demanded last weekend that South Korea end the broadcasts or face military action - a relatively rare case of following up on its frequent threats against the South.

Its 48-hour ultimatum, delivered in a letter to the South Korean Defence Ministry, was also uncharacteristically specific. The deadline is around 5 p.m. (0800 GMT) on Saturday in Seoul.

Seoul began blasting anti-North propaganda from loudspeakers on the border on Aug. 10, days after landmines wounded two South Korean soldiers along the DMZ, resuming a tactic both sides had stopped in 2004.

North Korea on Monday began its own broadcasts.

Baek told parliament the South's broadcasts would continue unless the North accepted responsibility and apologised for the mines. Pyongyang has denied responsibility.

"There is a high possibility that North Korea will attack loudspeaker facilities," Baek said.

Pyongyang's official KCNA news agency said Kim would put his troops on a "fully armed state of war" from 5 p.m. and had declared a "quasi-state of war" in frontline areas.

There were indications the North was preparing to fire short-range missiles, the South's Yonhap news agency said, citing an unnamed government source. The North often fires rockets into the sea during annual U.S.-South Korean military exercises, which are currently under way.

RARE ULTIMATUM

Pyongyang's declaration of a semi-state of war was its first use of such terminology since the North shelled a South Korean island in 2010, Yonhap said. Two South Korean marines and two civilians were killed in that incident, which followed another ultimatum from the North.

The nature of the latest ultimatum was unusual, said John Delury, North Korea expert at Yonsei University in Seoul.

"North Korea is a constant font of generalised threats, but putting a time stamp on it is a little bit different," he said.

South Korea's won currency and shares fell as the tensions unnerved markets already worried about the global economy.

The U.S. military, which bases 28,500 personnel in South Korea, said it was monitoring the situation.

Washington earlier urged Pyongyang to halt "provocative" actions after Thursday's exchange of fire, the first between the two Koreas since October.

Daniel Pinkston of the International Crisis Group think-tank said the large U.S. troop presence in the South for the military exercises could reduce the risk of escalation by pressuring the South to exercise restraint, and as a deterrent to the North.

"This is a bad time to pick a fight with the South while it has all these resources there," he said.

Fishing was suspended around three South Korean islands off the west coast. Most of the nearly 800 South Koreans ordered to leave their dwellings near the border on Thursday had returned, although one village remained evacuated, local officials said.

Morten Traavik, a Norwegian who organised a two-show visit to Pyongyang by Slovenian avant-garde rock band Laibach, said people were going about their business as usual.

"There have of course been news bulletins on North Korean television announcing the North Korean military's pretty bombastic statements," Traavik said by phone.