North Korea said it will release a South Korean fishing boat after it was found illegally in North Korean waters. Picture: Korean Central News Agency/Korea News Service via AP, File

Seoul/Panmunjom - North Korea said it will release a South Korean fishing boat on Friday after it was found illegally in North Korean waters, state media reported, as the US defence secretary visited the heavily militarised border dividing the Korean peninsula.

Tensions between North Korea and the United States have been building after a series of weapons tests by Pyongyang and bellicose verbal exchanges between US President Donald Trump and North Korean leader Kim Jong-un, stoking fears any miscalculation could lead to an armed confrontation.

"North Korean provocations continue to threaten regional and global security despite unanimous condemnation by the United Nations Security Council," US Defense Secretary Jim Mattis said in prepared remarks as he visited the demilitarised zone (DMZ) dividing the peninsula.

"As Secretary of State Tillerson has made clear, our goal is not war, but rather the complete, verifiable, and irreversible denuclearisation of the Korean peninsula."

Standing alongside Mattis, South Korean Defence Minister Song Young-moo said: "We together will continue to defend peace through strong will and strong might".

The proposed return of the South Korean fishing boat and its crew would avoid potentially worsening already strained relations between Pyongyang and South Korea and its US ally.

The South Korean fishing boat was seized on October 21 and investigation by the North found the boat and crew entered North Korean waters for fishing, state news agency KCNA reported.

North Korea decided to release the boat after "taking into account the fact that all the crewmen honestly admitted their offence, repeatedly apologising and asking for leniency," the report said in English.

The vessel and its crew would be released in waters at the military boundary between the two Koreas, which are still technically at war after their 1950-53 conflict ended in a truce not a peace treaty.

North Korean fishing boats have been found drifting south of the maritime border between the two Koreas at times, often having run out of fuel or broken down. 

Most North Korean crew are released to the North after interrogations by intelligence officials if they wish to return. It is more unusual for South Korean fishing vessels to be found under similar circumstances.

A South Korean Unification Ministry official said it was aware the fishing boat had gone missing earlier in the week. The crew of 10, including seven South Koreans and three Vietnamese, would be questioned by officials on their return, he added.

Ahead of a visit by Trump to Asia starting next week, Mattis has emphasised diplomatic efforts to find a peaceful solution to the current crisis during his week-long trip to the region.

"That's really what it was all about – to keep the (North Korea) effort firmly in the diplomatic lane for resolution," Mattis said earlier this week following three days of meetings with Asian defence chiefs in the Philippines.

CIA chief Mike Pompeo said last week North Korea could be only months away from developing the ability to hit the United States with nuclear weapons, a scenario Trump has vowed to prevent.

US intelligence experts say Pyongyang believes it needs the weapons to ensure its survival and have been sceptical about diplomatic efforts, focusing on sanctions, to get Pyongyang to denuclearise.

The United States on Thursday imposed sanctions on seven North Korean individuals and three entities for "flagrant" human rights abuses, including killings, torture, forced labor and the hunting down of asylum seekers abroad.

Trump, in a speech last month at the United Nations, threatened to destroy North Korea if necessary to defend itself and allies. Kim has blasted Trump as "mentally deranged."

Despite the rhetoric, White House officials say Trump is looking for a peaceful resolution of the standoff. But all options, including military ones, are on the table.

"Do we have military options in defence for attack, if our allies are attacked? Of course we do. But everyone is out for a peaceful resolution," Mattis told reporters travelling with him earlier this week.

"No one's rushing for war."