The Democratic People's Republic of Korea (DPRK) warned on Thursday of a "holy war" using its nuclear deterrent against the Republic of Korea (ROK) as Seoul vowed a "merciless counterattack" if its territory is attacked again.

Three Cobra helicopters fly in formation over K-1 tanks during the ROK's largest-ever air and ground military exercise on the Seungjin Fire Training Field in Pocheon on Thursday. [Photo/Xinhua]

"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," DPRK's official KCNA news agency quoted Minister of Armed Forces Kim Yong-chun telling a rally in Pyongyang.

The ROK's military on Thursday held a live-fire drill involving tanks, artillery and jet fighters, in a major show of strength staged a month after an exchange of artillery fire with the DPRK.

The exercises, the largest-ever ground-air joint live-fire drill, at Pocheon, 30 km south of the tense land border with the DPRK, lasted about 40 minutes.

The ROK's navy is also conducting a four-day exercise off the east coast, which began on Wednesday.

As the exercises took place on Thursday, ROK President Lee Myung-bak said its military should launch a "merciless counterattack" if its territory is attacked again by the DPRK.

"We had believed patience would ensure peace on this land, but that was not the case," Lee, criticized for perceived earlier weakness to DPRK attacks, told troops on a tour of an ROK forward army base overlooking DPRK territory on Thursday.

Pyongyang responded to the show of military might by denouncing the ROK as a "warmonger".

Its official news agency KCNA said in a commentary that the large-scale drills are a "crazy exercise for war" and aimed at "launching an aggression against the North".

Although the ROK claimed that the exercises were "routine drills" and "had nothing to do with the Yeonpyeong incident", the "provocative and aggressive nature of the drills" cannot be covered by these remarks, the KCNA said.

Beijing on Thursday repeated its call for all parties concerned to go back to the negotiating table.

"The situation on the Korean Peninsula remains highly complicated and sensitive," Foreign Ministry spokeswoman Jiang Yu told a regular news briefing.

"We appeal to relevant parties to keep calm, exercise restraint, adopt a responsible attitude and do more to ease the situation and contribute to peace and stability on the peninsula," she said.

Washington warned the DPRK that there was no reason to respond to the ROK's military drills.

During a daily news briefing on Wednesday, White House press secretary Robert Gibbs said the ROK's maneuvers had been announced well in advance and were transparent and defensive therefore "should in no way engender a response from the North Koreans".

Ni Feng, a researcher at the Chinese Academy of Social Sciences, said the ROK's series of military drills are largely a result of domestic pressure, while the DPRK fully understands that if war broke out it would be catastrophic.

"Pyongyang has its own calculations," Ni said. "Tension is likely to continue like this for some time, but sooner or later it will calm down".

In the DPRK, its top leader Kim Jong-il called for a "great offensive" to boost the country's infrastructure when inspecting a power station under construction in the northern city of Huichon, its leading daily Rodong Sinmun reported on Thursday.

During the tour, whose exact date was not specified, Kim underscored the need to wage a "great offensive" by mobilizing the whole party and army and all the people to complete the power station project before the country marks the centennial of the birth of late leader Kim Il-sung in April 2012.

Tensions have been high on the peninsula since the DPRK shelled an ROK island near the contested western sea border on Nov 23.

Pyongyang said its shelling was in response to the ROK's live-fire drill on Yeonpyeong Island. Seoul said it had been staging such artillery exercises for 37 years and the DPRK was seeking a pretext to attack.

Seoul staged a repeat drill on the same island on Monday, backed up by jet fighters and warships, but Pyongyang refrained from following earlier threats to hit back.