By Jon Herskovitz
SEOUL (Reuters) - North Korea convenes an annual meeting on Friday of its rubber-stamp parliament, where the secretive state typically reveals changes to its ruling elite and may tip its hand on succession plans for it communist dynasty.
Pyongyang is under pressure to end its boycott of nuclear disarmament talks, while tensions with its far richer southern neighbour are high after the sinking of a South Korean naval ship last month in which Seoul has said the North may have had a hand.
South Korea's defence minister has said it was possible the ship was hit by a North Korean torpedo, worrying investors who fret about an increased chance of armed conflict between the rivals who station more than 1 million troops near their border.
Seoul has few appealing options if the North was behind the sinking, but would not likely take an aggressive stance because it could escalate into major conflict that would harm the South's interests, Andrei Lankov, an expert on the North, said.
"Such raids would scare investors away from South Korea and damage its financial rating," he wrote in an opinion piece in the International Herald Tribune.
At last year's parliament session, leader Kim Jong-il made his first public appearance after he was suspected of suffering a stroke in 2008. He appeared gaunt, with thinning hair and having lost his trademark paunch..
Kim, 68, does not always attend the sessions and when he does attend, he typically does not speak. Images of him in his state's media over the past year have shown him in improved health.
Kim faced a rare crisis to his iron grip on power late last year when a botched currency reform sparked almost unheard of civil unrest, angering an impoverished public by raising prices and making it even more difficult to obtain already scarce food.
IN THE FAMILY
Kim has yet to reveal to the public his plans for succession in the state his family has run for more than 60 years.
Intelligence sources said the North's elite have been informed that he intends to anoint his youngest son, Kim Jong-un, as his heir.
Analysts will be looking to see if Jong-un, 26 and educated in Switzerland, is named as a member of the assembly, which would be a major sign he has been publically moved into the ruling elite. They will also looking closely to see if there will be a purge of economic cadres because of the currency debacle.
It usually takes a few days for details of the meeting to filter their way out of the secretive state.
The carefully choreographed sessions usually do not touch on the North's atomic ambitions or its negotiations with the outside world to reduce the threat it poses to the economically powerful region in return for aid and better global standing.
Last year, Kim was re-elected supreme military ruler and left no doubt about his second-in-command when he elevated his brother-in-law, Jang Song-taek, to a powerful military post.
Analysts said Jang was expected to help ease Kim's youngest son into a leadership role and serve as buffer between him and the state's powerful military.
Separately, the Japanese government said it extended its unilateral sanctions against North Korea for another year. The mostly symbolic measure bans trading and was first imposed in 2006 after North Korean missile launches and a nuclear test.
(Additional reporting by Christine Kim in Seoul and Yoko Kubota in Tokyo)
(Editing by Alex Richardson)
