North Korea crisis: Kim Jong-un threatens 'all-out nuclear war'

With maps of US targets on his walls, North Korea's leader is boosting his warrior status with unprecedented sabre-rattling

North Korea stepped up its pugnacious rhetoric still further yesterday by warning Seoul that the Korean Peninsula was entering "a state of war". The statement comes in the wake of some of Pyongyang's strongest ever threats, including a willingness to launch missiles against US bases.

Analysts say a full-scale conflict is extremely unlikely, noting that the Korean Peninsula has remained in a technical state of war for 60 years. But the North's increasingly bellicose words – the most intemperate uttered in many a decade, including threats to launch a nuclear strike – have raised worries that a misjudgement by either side in how to address the warnings could lead to a clash.

The situation is now not unlike the second act of a rather bad Cold War film. In North Korea, the young leader is photographed surrounded by elderly military officers in their faintly comic hats, while, in the background, maps show New York, Washington, and Austin, Texas, as missile targets. Meanwhile, in the southern half of the peninsula, the US and its ally continue to act out their annual military exercises with state-of-the-art bombers firing blanks. These manoeuvres will go on until the end of April.

North Korea's threats are seen as efforts to provoke the new government in Seoul, led by President Park Geun-hye, to change its policies towards Pyongyang, and also to win diplomatic talks with Washington so it could get more aid. The aggressive posturing may also be part of building up the military credentials of Kim Jong-un, who has been in post for only 16 months, providing some patriotic cheerleading for domestic consumption, and also showing anger over UN sanctions imposed over a recent underground nuclear test. Some of it is also a direct response to the military exercises in the South. On Thursday, for instance, US officials revealed that two B-2 stealth bombers dropped dummy munitions on front lines as part of drills with South Korean troops. Hours later, Kim ordered his generals to put rockets on stand-by and threatened to strike American targets if provoked.

North Korea said in a statement yesterday that it would deal with South Korea according to "wartime regulations" and would retaliate against any provocations by the US and South Korea without notice.

"Now that the revolutionary armed forces of the DPRK [Democratic People's Republic of Korea] have entered into an actual military action, the inter-Korean relations have naturally entered the state of war," said the statement, which was carried by Pyongyang's official Korean Central News Agency. The statement added: "Provocations will not be limited to a local war, but develop into an all-out war, a nuclear war."

In Washington, Caitlin Hayden, spokeswoman for the White House National Security Council, said: "We've seen reports of a new and unconstructive statement from North Korea. We take these threats seriously and remain in close contact with our South Korean allies. We remain fully prepared and capable of defending and protecting the United States and our allies. We continue to take additional measures against the North Korean threat, including our plan to increase the US ground-based interceptors and early-warning and tracking radar, and the recent signing of a South Korean-US counter-provocation plan."

Saturday's belligerence also included a threat by the North to shut down a factory complex that is the last major symbol of inter-Korean co-operation. The Kaesong industrial park, which is run with North Korean labour and South Korean know-how, has been operating normally, despite Pyongyang shutting down a communications channel typically used to co-ordinate travel by South Korean workers to and from the park, just across the border in North Korea.

An identified spokesman for the North's office controlling Kaesong said yesterday that it would close the factory park if South Korea continued to "undermine its dignity". Pyongyang had felt slighted by media reports suggesting the factory only remained open because it was a source of hard currency for the impoverished North.

Dozens of South Korean firms run factories in the border town of Kaesong. Using North Korea's cheap, efficient labour, the Kaesong complex produced goods worth $470m (about £310m) in 2012. North Korea has, however, previously made such threats with regard to Kaesong without acting on them.

Across North Korea, soldiers are reported to be gearing up for battle and shrouding their vehicles with camouflage netting. Newly painted signboards and posters call for "death to the US imperialists" and urge the people to fight with "arms, not words".

But even as Kim Jong-un issues midnight battle cries to his generals to ready their rockets, he and his million-man army know full well that a successful missile strike on US targets would be suicide for the out-powered North Korean regime. Some 28,500 American troops are still stationed in South Korea, and 50,000 more are in nearby Japan.

North Korea cites what it perceives as a US military threat as a key reason behind its need to build nuclear weapons, and has poured a huge chunk of its small national budget into defence, science and technology. In December, scientists launched a satellite into space on the back of a long-range rocket using technology that could easily be converted for missiles; in February, they tested an underground nuclear device as part of a mission to build a bomb they can load on a missile capable of reaching the US. Most observers see North Korea's bombs and missiles as more of an expensive, dangerous safety blanket than real firepower. They are the only real playing card North Korea has left.

But the reach of Kim Jong-un's missiles is far more limited than the optimistic maps on his office walls suppose. Narushige Michishita, director of security and international studies at Japan's National Graduate Institute for Policy Studies, isn't convinced that North Korea is capable of attacking Guam, Hawaii or the US mainland. He says Pyongyang hasn't successfully tested an intercontinental ballistic missile. But its medium-range Rodong missiles, with a range of about 800 miles (1,300km), are "operational and credible" and could reach US bases in Japan, he says.

More likely, however, is a smaller-scale incident, perhaps off the western coast of the Korean Peninsula, that would not provoke the Americans to unleash their considerable firepower. For years, the waters off the west coast have been a battleground for naval skirmishes between the two Koreas because the North has never recognised the maritime border drawn unilaterally by the UN.

In July, it will be 60 years since North Korea and China signed an armistice with the US and the United Nations to bring an end to three years of fighting that cost millions of lives. The designated Demilitarized Zone has evolved into the most heavily guarded border in the world. It was never intended to be a permanent one. But six decades later, North and South remain divided, with Pyongyang feeling abandoned by the South in the quest for reunification and threatened by the Americans.

In that time, South Korea has blossomed from a poor, agrarian nation of peasants into the world's 15th-largest economy, while North Korea is struggling to find a way out of a Cold War chasm that has left it with a per-capita income on par with sub-Saharan Africa. It's a tall order. Living standards in Pyongyang, the capital, are relatively high, with new shops and restaurants catering to a growing middle class. But UN officials' reports detail harsh conditions elsewhere in North Korea: up to 200,000 people are estimated to be languishing in political prison camps, and two-thirds of the country's 24 million people face regular food shortages.