The man, identified as a former missile scientist, told a US congressional hearing on Tuesday that an organisation of ethnic Koreans in Japan had regularly smuggled missile components to North Korea using a passenger-cargo ship plying a standard route between the two countries.

But the Pyongyang-guided General Association of Korean Residents in Japan (Chongryon) rejected the allegation as a "total fabrication" to strengthen the "policy of containing (North) Korea."

Japanese Prime Minister Junichiro Koizumi told reporters at his official residence, "we must sternly deal with illegal transactions."

In their summit at his Texas ranch on Friday, US President George W. Bush is expected to call on Koizumi to step up pressure on North Korea to give up its suspected nuclear weapons programme.

The defector, who fled to China in 1997, said he worked for nine years as an expert in guidance systems for the North Korean missile industry, according to press reports from Washington.

Using the pseudonym Lee Bok-Koo, he said that 90 percent of components used in his work on the North Korean missile project were smuggled in on a North Korean ferry from Japan.

"The way they bring this in is through ... the North Korean association in Japan and they bring it by ship" regularly, Lee testified.

A top Japanese government spokesman said he had heard similar allegations before and if confirmed could provoke a response from Tokyo.

"If they are proven true, we can respond in various ways," Chief Cabinet Secretary Yasuo Fukuda told a regular briefing.

He added that Japan had already tightened checks against the smuggling of items such as narcotics from North Korea.

The ruling conservative party has increased its calls for economic sanctions, including a ban on remittances and trade between the two countries, if Pyongyang continues with its nuclear programme.

"We are not considering (sanctions) at this point in time," Foreign Minister Yoriko Kawaguchi told the lower house committee on foreign affairs Wednesday.

"But if the situation develops in an undesirable direction, our country needs to adopt a different policy," she added.

The ship, the Man Gyong Bong-92, sails between Wonsan in North Korea and the port of Niigata in Japan about 20 times a year, providing the only direct link between the countries in the absence of diplomatic ties.

The service was suspended last January as tension mounted over North Korea's nuclear posturing and a protracted row over the kidnapping of Japanese by North Korean agents during the Cold War era for spy training.

The ship has been regularly used for visits to North Korea by ethnic Koreans in Japan and to carry food, electronic products and other daily necessities between the two countries.

Bundles of cash are also said to be carried aboard the ship from Japan to the impoverished but heavily-armed country. The remittances, estimated at up to 600 million dollars a year, are considered a vital economic lifeline for North Korea.

There is no restriction on remitting money from Japan to North Korea, according to a finance ministry official in charge of foreign exchange.

Most money is funnelled to North Korea through banks or carried in cash by passengers on the Man Gyong Bong-92 or other travellers to North Korea, he said.

SPACE.WIRE