The United States announced on Tuesday that million of dollars frozen in a Macau bank will be released to North Korea, and said it was now up to Pyongyang to start shutting down a nuclear reactor days before a deadline.
The reclusive state has insisted it will not close the reactor, which supplies it with weapons-grade plutonium, until $25 million dollars in funds linked to North Korean interests and frozen since 2005 in Macau's Banco Delta Asia are freed.
Under an international deal agreed two months ago to end its nuclear weapons program, North Korea has until Saturday to start shutting down its Yongbyon atomic plant.
"The United States understands that the Macau authorities are prepared to unblock all North Korean-related accounts currently frozen in Banco Delta Asia," the US Treasury said in a statement.
A Macau Monetary Authority official said only that there would be an announcement of some kind within a "few days".
But Japan's Kyodo news agency quoted South Korea's negotiator to the nuclear talks, Chun Yung-woo, as saying that North Korea would be able to withdraw the funds "freely from tomorrow".
The funds were frozen after the United States accused the Macau bank of being involved in money laundering.
Furious that the money still had not been freed, North Korea walked out of a round of six-country talks on its nuclear program in March, five months after its first atomic test.
The Treasury's announcement came as top US officials visited both sides of the divided Korean peninsula.
"I think we've reached a very important day today with the imminent release of these funds," chief US negotiator Chris Hill said in Seoul.
"Now we need to move on from this banking issue to the real purpose of our February agreement, which is to get on with denuclearisation."
On Monday, New Mexico Governor Bill Richardson flew to North Korea where he is to receive the remains of six soldiers killed during the 1950-53 Korean War.
NBC television reported that North Korean officials had told Richardson once the money was released, UN nuclear inspectors, who were expelled in 2002, would be allowed back to the country.
Richardson plans on Wednesday to cross the demilitarized zone which has long split the peninsula and into South Korea with the soldiers' remains, which will then be flown to the United States for identification.
Adding pressure on Pyongyang, Japan said it would extend sanctions imposed last October in response to the nuclear test.
The sanctions, which include a ban on imports from the impoverished state and bar all North Korean ships from Japanese ports, will be extended for six months, Foreign Minister Taro Aso told reporters.
He said it was due largely to a lack of progress both on resolving the domestically highly sensitive issue of Japanese nationals abducted by North Korea decades ago as well as over Pyongyang's nuclear reactor.
"The North Koreans have not dealt with the abduction issue in good faith, and they have not dealt with the nuclear issue either, giving the BDA as a reason," Aso said.
According to a February 13 agreement between the two Koreas, China, Japan, Russia and the United States, Pyongyang had 60 days to shut its nuclear facilities in return for energy aid.
China, which has hosted six-party talks since 2003, shrugged off the snags that have arisen since the February deal.
"I don't agree that because of some delays in the initial stage the six party talks will fail or be annulled," Foreign Ministry spokesman Qin Gang told a briefing.