North Korea on Wednesday cut off the sole regular military contact with the U.S.-led U.N. Command that monitors the Korean War armistice, saying it was "meaningless" to sit with the Americans.

The move will further isolate the North amid heightened tension over its suspected nuclear weapons programs.

The North has accused the United States of using the nuclear issue as an excuse to attack the communist state, and Pyongyang has said it would boost its defenses amid such fears..

But South Korean President Roh Moo-hyun on Wednesday dismissed as "groundless" allegations by the North that U.S. forces may attack and spark a "second Iraqi crisis" on the Korean Peninsula.

"There will be no war on the Korean Peninsula as long as we do not want a war," Roh's office quoted him as saying, adding that Washington has repeatedly pledged to resolve the crisis peacefully.

Meanwhile, U.N. envoy Maurice Strong said that North Korean officials told him in meetings in Pyongyang last week that they "reserved the right" to reprocess spent fuel rods that experts say could yield enough plutonium for several atomic bombs within months. Such a move would spike tension even further.

The North's Korea People's Army sent a telephone message to the U.N. Command saying it will no longer send its delegates to the liaison-officers' meeting at the inter-Korean border village of Panmunjom.

"It is meaningless to sit together with the U.S. forces side to discuss any issue as long as it remains arrogant," the North's official news agency KCNA quoted the North Korean message as saying.

The announcement came as lawmakers from across North Korea convened the country's rubber-stamp parliament amid heightened tension over the communist state's suspected nuclear weapons program.

The U.N. Command, which has monitored the armistice since the end of the 1950-53 war, had no immediate comment. Without a peace treaty, the Korean Peninsula is still technically in a state of war.

U.S. officials representing the U.N. Command have met North Korean officers at Panmunjom almost weekly since the end of the war.

In Japan, space agency officials were preparing to launch their first spy satellites into orbit on Friday. North Korea has condemned the move, prompting fears it may retaliate and test-fire a long-range missile.

Japan's satellite launch "is for the purpose of information gathering," said Japanese Foreign Ministry spokesman Hatsuhisa Takashima. "It is not offensive, or intended to interfere with any other nation's security whatsoever."

Takashima said that the satellites will play a role in Japan's national security, however.

Meanwhile in the North's capital, Pyongyang, North Korean Finance Minister Mun Il bong said that the 2003 budget will increase 14.4 percent from last year, with 15.4 percent of the spending allocated to national defense, according to KCNA.

Mun said the money would be used "to meet the fundamental interests of the revolution so as to develop the national defense industry and train the people's army as an invincible army and thus consolidate the country's defenses as an impregnable fortress."

North Korea accuses Washington of inciting a dispute over its alleged programs to develop nuclear weapons to create an excuse for invasion. U.S. President Bush has branded the North part of an "axis of evil" with Iraq and Iran.

Washington says it seeks a diplomatic solution to the crisis — but Bush has said that if diplomacy fails a military solution may be considered.

South Korean Foreign Minister Yoon Young-kwan left Wednesday for Washington to discuss North Korea with top U.S. officials.

With the United States focused on Iraq, experts fear North Korea might use the opportunity to reprocess spent nuclear fuel to make atomic bombs.

The standoff flared in October when U.S. officials said Pyongyang admitted having a secret nuclear program in violation of a 1994 pact.