By Jon Herskovitz and Jack Kim
SEOUL (Reuters) - North Korea dismissed reports onWednesday that leader Kim Jong-il might be seriously ill, adevelopment that could trigger a power shift in Asia's onlycommunist dynasty.
Speculation grew after the reclusive 66-year-old leader,widely believed to suffer from debilitating illnesses, failedto appear at a parade on Tuesday to mark the 60th anniversaryof his nation's founding. A U.S. intelligence official said hemight have suffered a stroke.
"(There is) no problem," North Korea's nominal number twoleader, Kim Yong-nam, told Japan's Kyodo news agency inPyongyang.
Senior North Korean diplomat Song Il-ho told Kyodo earlier:"We see such reports as not only worthless, but rather as aconspiracy plot."
The health concerns come just as the North appears to begoing back on a deal with major powers to scrap a program todevelop nuclear weapons in return for massive financial aid anda chance to be accepted into the rest of the world.
South Korean parliamentarians said after a briefing by thecountry's spy chief that Kim had suffered a stroke but hiscondition was under control.
"He is not gravely ill," one ruling party lawmaker wasquoted as saying by Yonhap news agency.
Kim's death would create huge uncertainty over leadershipin a country whose deep distrust of the outside world is backedby one of the globe's largest standing armies and whichprobably has atomic weapons.
The North has threatened to turn its wealthy neighbour inthe south to dust and considers Japan and the United States asmortal enemies.
Kim's health and possible successor are two of Pyongyang'smost closely guarded secrets.
South Korea said in a 2006 intelligence report that whenKim died, it expected the North Korean government to lapse intoa brief coma and then hunker down with top military officialsbattling for power, perhaps in partnership with one of Kim'sthree known sons.
NUCLEAR CONCERNS
Though a U.S. intelligence official said on Tuesday thatKim may have suffered a stroke, the White House issued noinformation. "I'm still unable to provide you any comment onreports about the leader of North Korea's health," White Housespokeswoman Dana Perino told reporters.
She did say, without elaborating, that some commentsattributed to Kim Yong-nam, whom she called Pyongyang's"second-in-command," seemed to be "positive" signs formultilateral talks over the North Korean nuclear program.
Kim, whom state media calls the Dear Leader, was groomedfor years to succeed his father and the North's foundingpresident Kim Il-sung, who died in 1994.
This time there is no clear heir and many analysts say theruling hierarchy is riven by factionalism dividing those whowant to continue a hard line against the West and others whosee even a little reform as the only way to drag the countryout of abject poverty.
The mystery surrounding Kim also leaves a frighteningquestion mark for South Korea, for which a worst-case scenariowould be the collapse of the North, leaving it facing socialchaos that could wreck Asia's fourth largest economy.
President Lee Myung-bak called a hurried meeting withsenior aides. His unification minister called the situation"odd" but warned against any premature conclusions.
"It is definitely a very delicate time for North Korea inmany respects," Kim Ha-joong told parliamentarians.
Analysts, too, cautioned against reading too much into theabsence of the North Korean leader, who often disappears from afawning state media for long stretches.
MISSES GOOSE-STEPPING SOLDIERS
But others said that given the importance the North placedon the anniversary it was surprising Kim was not on show at theparade featuring columns of goose-stepping soldiers.
"In North Korea or China national anniversaries, especiallythe 10-year anniversaries, are big events, and for him not toappear suggests something is wrong," said Cai Jian, an experton Korea at Fudan University in Shanghai.
South Korean markets, hardened to speculation about thehermit state, showed little reaction. But investors said thenews was a reminder of the risks of living next door to NorthKorea, whose proximity keeps the South's credit rating a fewlevels below where it might normally expect to be.
"If Kim is indeed gravely ill or even worse, dead, thiscannot be good for the market in the short-term, as politicalinstability and uncertainties on the North will heighten SouthKorea's geopolitical risks," said Lee Kyoung-su of TaurusInvestment & Securities.
(Additional reporting by Park Jung-youn in Seoul, IsabelReynolds in Tokyo, Chris Buckley in Beijing and Matt Spetalnickin Washington; Editing by Jonathan Thatcher and David Fogarty)
