North Korean leader Kim Jong-Un said raising living standards was his top priority in an annual New Year’s address on Friday.

North Korean leader Kim Jong-Un said raising living standards was his top priority in an annual New Year's address on Friday.

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.

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.

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