North Korea said Saturday its relations with South Korea had been driven into a "catastrophic" phase again, warning the South’s scattering of anti-Pyongyang leaflets could spark a war.

North Korea said Saturday its relations with South Korea had been driven into a "catastrophic" phase again, warning the South's scattering of anti-Pyongyang leaflets could spark a war.

The statement came hours after Pyongyang's foreign ministry said the North would bolster its "war deterrent", accusing the United States of deliberately escalating tension through ongoing joint military drills with the South.

"The North-South relations have been driven into a catastrophic phase again due to the South Korean authorities' frantic scattering of anti-DPRK (North Korea) leaflets", said a spokesman for the North's delegation to the high-level contact with the South.

"The leaflet scattering operation and smear campaign ... going beyond the tolerance limit are undisguised acts of declaring a war", he said.

Earlier, North Korea's military condemned the South Korean navy's seizure of a North Korean fishing boat near the disputed sea boundary as a "grave provocation" and threatened to retaliate.

South Korea handed back the boat which was captured with three sailors aboard near the disputed Yellow Sea border late Thursday.

The North's Committee for Peaceful Reunification of Korea said Wednesday the South's military scattered leaflets denouncing its regime and leader Kim Jong-Un by using gas-filled balloons floated from frontline islands near the disputed sea border in the Yellow Sea.

The South Korean defence ministry denied the allegation. An unidentified military official told Yonhap news agency the leaflets were launched by a local Christian group.

"Does she really want to see such leaflets becoming a source of war for reducing the base of provocations to ashes? She should bear in mind that now is the time to make a choice herself", the North's spokesman said, referring to South Korean President Park Geun-Hye.