By Christine Kim and Heekyong Yang
SEOUL (Reuters) - The escalating threat arising from nuclear-armed North Korea's recent series of missile tests is prompting South Korea to beef up its military muscle and experts warn it could spur an arms buildup elsewhere in Northeast Asia.
South Korea and Japan are accustomed to the North's frequent threats to attack. But the war of words between Washington and Pyongyang has raised fears of a sudden clash along the world's most militarised border dividing the two Koreas, which might quickly escalate to all-out war.
After North Korea's second test of an intercontinental ballistic missile (ICBM) on July 28, South Korean President Moon Jae-in ordered a speedy deployment of the controversial U.S. THAAD anti-missile defense system, reversing his earlier decision to postpone it pending an environmental review.
This week, the U.S. Defence Department said it was "actively" considering revising bilateral ballistic missile guidelines with South Korea to allow Seoul to build more powerful missiles -- at the South's request.
Moon told U.S. President Donald Trump in a telephone conversation on Monday South Korea also wants to build a nuclear-powered submarine, presidential officials said.
"All of this could lead to further militarization of South Korea," said Yang Uk, a senior research fellow at the Korea Defence and Security Forum.
South Korea, which spends around a tenth of its annual budget on defense, is already home to some 625,000 local soldiers and more than 28,000 U.S. troops. The country, still technically at war with the North after the 1950-53 Korean War ended in a truce and not a peace treaty, has deployed the U.S.-built Patriot missile defense system, as well as the Terminal High Altitude Area Defence (THAAD) system.
Trump warned the North and its leader Kim Jong Un against attacking Guam or U.S. allies on Friday, a day after the isolated country said it was finalizing by mid-August a plan to launch four intermediate range missiles toward waters off the U.S. Pacific territory.
"If North Korea actually launches Hwasong-12 missiles towards Guam, they're going to do it with all their other missiles, artillery and tanks ready for action," said Kim Dong-yub, a military expert at Kyungnam University's Institute of Far Eastern Studies in Seoul. "And we should be prepared too."
Even before the latest spike in tensions, South Korea was seeking to enhance its missile-defense capabilities in the face of the unprecedented pace of North Korean missile tests.
Japan, worried its ballistic missile defenses could be overwhelmed by swarm attacks or circumvented by warheads launched on lofted trajectories, is likely to acquire a ground-based version of the Aegis missile defense system. It is also mulling the acquisition of munitions that would allow it to strike North Korea missile sites.
"The greatest threat to both states remains shorter range artillery, artillery rockets and stockpiles of short-to-medium range missiles. The focus will primarily remain upon bolstering defensive rather than offensive capabilities," said Reed Foster, a defense analyst for IHS Jane's.
"I don't believe that there will be any significant altering of East Asian procurement strategies, despite the rhetoric emanating from North Korea, principally because for them the threat hasn't altered drastically," Reed added.
SOUTH GOES NUCLEAR?
Conservative lawmakers in Seoul in recent days have even called for a "nuclear balance" on the peninsula, saying Seoul should ask Washington to redeploy U.S. nuclear weapons if South Korea is unable to develop its own.
The United States withdrew nuclear weapons from South Korea in 1992, when the two Koreas agreed to make the peninsula nuclear free. In violation of that agreement as well as U.N. Security Council resolutions, North Korea has conducted five nuclear tests.
"Now is the right time to actively look at bringing back tactical nuclear weapons," Chung Woo-taik, floor leader of the main opposition Liberty Korea Party, told Reuters. "North Korea broke the denuclearisation agreement a long time ago."
Reintroducing nuclear weapons remains an unlikely scenario, as that would undermine demands from Seoul and Washington for North Korea to abandon its nuclear programs.
For now, officials are instead focused on changing the missile guidelines, which allow Seoul to have ballistic missiles with a flight range capped at 800 km (497 miles), topped with a maximum 500 kg (1,102 pounds) warhead.
South Korea is less focused on increasing the flight range, as that could face opposition from neighbors including China, Russia and Japan, and the 800-km range limit covers all of North Korea in any case, senior government officials said.
Rather, Seoul wants to double the maximum payload to 1,000 kg or greater, powerful enough to target underground bunkers or nuclear sites within the North, the officials said.
That's still a fraction of the size of "the mother of all bombs", which the United States dropped on a suspected Islamic State target in Afghanistan in April. The 21,600-pound GBU-43 bomb is one of the largest non-nuclear devices used in combat.
(Additional reporting by Soyoung Kim in SEOUL, Tim Kelly and Nobuhiro Kubo in TOKYO, Editing by Soyoung Kim and Bill Tarrant)