North Korean leader Kim Jong-Un said raising living standards was his top priority in a low-key annual New Year's address on Friday that avoided any explicit reference to the country's nuclear weapons programme.

The 30-minute televised speech was not without the normal bellicose rhetoric -- threatening a "sacred war" if provoked and stressing the need to develop "varied" military strike options -- but the clear thrust was economic development in the isolated, cash-strapped state.

"The Workers Party of Korea gives top priority to the issue of improving people's living standards among millions of other national tasks," Kim said.

"We must create a turnaround in economic development," he added.

Kim has issued similar calls in his three previous New Year addresses and, as on those occasions, Friday's speech offered little in terms of specific policy for achieving his economic objectives.

On relations with South Korea, Kim said he was open to talks but warned Seoul against any activity that might threaten a tentative cross-border agreement reached in August to reduce tensions.

In particular, he stressed the provocative dangers inherent in the South's annual joint military exercises with the United States -- a perennial thorn in North-South ties.

- 'Merciless, sacred war' -

"If aggressors and provocateurs touch us even slightly, we will not hesitate to respond with a merciless sacred war for justice and national reunification," he said.

His speech came a day after the state funeral of North Korea's top official in charge of relations with South Korea, Kim Yang-Gon, who state media reported as having died in a car accident on Tuesday.

Kim had long been the North's point man on cross-border affairs, and his death was seen as a further setback to efforts to improve the always volatile relations between Seoul and Pyongyang.

Kim Jong-Un, wearing black-rimmed glasses and his trademark black Mao suit, delivered his speech from behind a lectern in a wood-panelled room in the ruling Workers' Party Central Committee Office Building in Pyongyang.

No audience was shown although the address was regularly interrupted by what appeared to be canned applause.

There was no mention of the nuclear arsenal or ballistic missile programme that has made the North the target of multiple international sanctions over the years, although Kim did stress the need to "develop more varied means of military strikes".

"The overall tone was quite low-key, and the emphasis was clearly on the economy, rather than political or military issues," said Yang Moo-Jin, a professor at the University of North Korean Studies in Seoul.

- Looming party congress -

"Possibly he wanted to avoid irritating China and others in the region ahead of the crucial party congress in May," Yang said.

The Workers' Party congress will be the first of its kind for 35 years, and is expected to offer some clarity on the current leadership's policy direction.

Since taking over power following the death of his father Kim Jong-Il in late 2011, Kim has prioritised economic development in a way that his father, with his "military first" policy, never did.

In his very first public address, at a military parade in April 2012, Kim had said he was determined that North Koreans would "never have to tighten their belts again".

He has relaxed some controls on farmers and state-run firms, and set up more than a dozen special economic zones.

And a closely monitored but tolerated grassroots capitalism, born out of a spirit of survivalist self-sufficiency that got many through the catastrophic failure of the state distribution system in the famine years of the mid-to-late 1990s, has given rise to a growing entrepreneurial class.

While North Korea does not release official economic data, South Korea's central bank estimated its economy expanded 1.0 percent in 2014.

But the North remains a deeply impoverished country with a gross national income estimated at just 2.3 percent of the South's.

And there is a stark urban-rural divide in living standards, with malnutrition still a serious problem in the countryside.