Columns of rocket units were part of the procession, which demonstrated the "invincible might of the KPA equipped with modern offensive and defensive means," the Korean Central News Agency said.

It was not immediately clear whether any of its latest missiles were showcased. The communist state tested ballistic missiles last July, sparking international alarm and United Nations sanctions.

A nuclear test last October further heightened tensions. In February the North agreed to scrap its nuclear programme as part of a six-nation deal, but the agreement is in limbo amid a row over financial sanctions.

Soldiers, cadets, security forces and others, preceded by a large portrait of founding president Kim Il-Sung, marched through the square, said South Korea's Yonhap news agency, which saw TV footage of the event.

It said thousands of spectators manoeuvred in the square, which was decorated with a sea of flowers, to form the names in Korea's Hangeul script of the current leader and his father Kim Il-Sung, who died in 1994.

North Korea came into being in 1948 but says its army was founded by Kim Il-Sung during his independence battle against Japan, which colonised the Korean peninsula from 1910 to 1945.

The anniversary of the 1.1 million-strong military is marked each year with political and cultural events, but this was the first such parade since October 2005.

Kim Jong-Il has built up his power base within the all-powerful military by pushing a Songun (army-first) policy, which prioritises the welfare of troops over civilians.

The ruling party newspaper Rodong Sinmun vowed to give priority to strengthening military power "no matter how hard the people's livelihood becomes."

"In order to protect sovereignty and independence, it is necessary to counter the military hegemony of the US imperialists by force of arms," it said.

The North admits it will be short of one million tons of food this year.

"We have a mighty war deterrence to safeguard the interests of the country and the safety of the people," said Rodong Sinmun's editorial.

It praised Kim Jong-Il for building "an invincible socialist military power which no formidable enemy dare provoke" and called for unbending loyalty to him.

Before attending the parade, Kim, accompanied by top military officials, paid homage to his father whose embalmed body is kept at the Kumsusan Memorial Palace, KCNA said.

It did not mention the name of Jo Myong-Rok, a 79-year-old vice marshal, who is reportedly ill.

Jo, one of Kim's close aides, was in critical condition due to kidney failure, a civic aid group here said last week.

Along with biological and chemical weapons, the North has a huge stockpile of conventional arms including 820 fighters and bombers, 310 helicopters, 3,700 tanks, 13,000 field artillery units, 2,100 armoured vehicles and 60 submarines, according to South Korea's defence ministry.

It said last December the North had also acquired some 200 artillery pieces which could strike Seoul when sited along the border, and about 40 percent of its fighter jets were just north of the frontier -- minutes away from the South's capital.

earlier related report
North Korea Confirms Bank Transfer Problems
Seoul (AFP) April 25 - North Korea has confirmed that problems in transferring its cash from a Macau bank are delaying settlement of a long-running dispute which is blocking progress on a nuclear disarment deal.

But South Korea said the row over the accounts, which had been frozen in Banco Delta Asia (BDA) at US instigation, is close to being settled.

"There have been no results yet. We have to see them," Kim Myong-Gil, deputy head of the North Korean delegation to the United Nations, told Yonhap news agency Tuesday in a telephone interview about the BDA funds.

"Transfer (to other banks) must become possible," Yonhap quoted him saying in a report on Wednesday.

Asked whether the United States has promised to make the transfer possible, Kim replied: "That was agreed upon from the beginning."

The North, which tested a nuclear bomb last October, missed an April 14 deadline to start shutting down its nuclear programme under a six-nation accord reached in February. It has always said it will only make the first move once it receives the 25 million dollars which had been frozen in BDA since 2005 on suspicion of money-laundering and counterfeiting.

Macau's financial authorities have unblocked the funds and the United States has said they are available for collection.

Analysts believe other foreign banks are reluctant to accept the transferred cash because it is seen as tainted. They say that apart from just recovering the money from BDA, North Korea wants to ensure that its access to the international financial system has been restored.

South Korean Foreign Minister Song Min-Soon said the dispute was almost settled.

"There still exist various procedural matters to sort out and the efforts to resolve them are near the final stage," he told reporters.

"All the participants in the six-party talks are determined to implement the February 13 agreement," Song said.

He said he would meet US Secretary of State Condoleezza Rice to discuss the North Korean nuclear issue on the sidelines of an international conference on Iraq in Egypt next month.

South Korea's chief nuclear negotiator Chun Yung-Woo left Monday for the United States for talks with his counterpart Christopher Hill on the bank row.

Yonhap said a senior White House official hurried to New York on Tuesday for discussions with North Korean diplomats on the same issue.

Victor Cha, director for Asian affairs at the National Security Council, canceled a Washington appointment at the last minute and headed for New York where North Korea's UN mission is situated, it quoted a source as saying.

On Sunday South Korea agreed to resume its annual 400,000 tons of rice aid to the North, but said shipments would be conditional on Pyongyang moving to shut down its nuclear programme.

earlier related report
Abe says NKorea leader rational
Tokyo (AFP) April 25 - Japanese Prime Minister Shinzo Abe, known for his hard line on North Korea, says leader Kim Jong-Il is a rational player bent on bringing the United States to negotiate.

Abe dismissed talk that the "Dear Leader", who enjoys an elaborate cult of personality, was crazy.

"In a sense, Chairman Kim Jong-Il is a man who thinks rationally," Abe said in an interview with CNN to be broadcast ahead of a visit to the United States starting Thursday.

"It is true that North Korea is heading in an obviously wrong direction," Abe said, as quoted by a government official.

"However having seen its diplomacy so far, I think it is based on one theory -- which is that the country is seeking power to get the United States to the negotiating table," Abe said.

"In order to achieve that goal, they carried out the nuclear test," he said. Abe, who built his career taking a tough line on Pyongyang, slapped sweeping sanctions on the impoverished state after its tests of missiles and an atomic bomb last year.

He has refused to fund a US-backed six-nation deal reached in February that provides aid to North Korea in exchange for disarmament.

Abe says he will not provide any aid until North Korea resolves an emotionally charged row over its kidnappings of Japanese citizens in the 1970s and 1980s.

In 2002, Abe accompanied his predecessor Junichiro Koizumi as an adviser on a landmark visit to Pyongyang, where Kim admitted his regime had abducted Japanese to train its spies.

Both Koizumi and former US secretary of state Madeleine Albright, who visited Pyongyang in 2000, faced accusations of being too cozy with Kim Jong-Il.

Koizumi, after a second summit with Kim in 2004, said: "Many people may have a dreadful, spooky image of him as a dictator. But I found him to be a person who is gentle, a cheerful individual who cracks jokes and is quick-witted."

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