South Korea's defense minister said Thursday North Korea has made a rather smooth power transition to young leader Kim Jong-un, but the communist state still faces tough challenges to revive its moribund economy.

"At present, North Korea's power shift appears to have gone smoothly," Kim Kwan-jin said in a meeting with a group of senior journalists at the defense ministry.

The defense chief said the largely untested leader, who took pwer in December following death of his father Kim Jong-il, was tying to introduce economic reforms, even though it is not clear they can succeed.

"A key task for Kim Jong-un is the economy." Kim said. "(He) is making various attempts, but it is very unclear whether those efforts could produce visible outcomes soon or the economic reform measures could benefit the North Korean people."

But when it comes to the armed forces, Kim said the North Korean leader appears to be moving ahead with the military-first policy of his father.

As shown in Pyongyang's belligerent rhetoric against the South, recently highlighted by a warning to attack defectors' attempting to send propaganda leaflets to the North, Kim said Pyongyang will continue to give top priority to military strength above all and seek nuclear weapons.

"North Korea has prepared a third nuclear test and will conduct it pending a political decision," Kim said. "It will conduct long-range missile tests in the future."

Pyongyang conducted nuclear tests in 2006 and 2009, which sparked international outcry and economic sanctions on the reclusive state. It unsuccessfully fired off a long-range rocket in April, which was seen as an apparent attempt to test its missile technology.

A top North Korean military official's appearance wearing the insignia of the four-star rank, which spurred speculation of degradation from the vice marshal rank, also seems as part of efforts to cement his grip on power after a series of North Korean soldiers' defections in recent months raised questions over the lax military discipline, the South Korean official said.

In July, Army Chief Hyon Yong-chol was promoted to the rank of vice marshal, a day after the former chief Ri Yong-ho was removed from his post. But a picture from an October event showed him carrying the insignia of the four-star rank. (Yonhap News)