SEOUL (AFP) - The United States and South Korea agreed on Friday (Sept 1) to increase Seoul's missile capabilities just days after North Korea fired a ballistic missile over Japan and threatened further launches, Seoul's Yonhap news agency reported.

The reclusive state fired an intermediate-range Hwasong-12 over Japan early on Tuesday, which it said was a mere "curtain-raiser" for the North's "resolute countermeasures" against ongoing US-South Korean military drills.

It came as the US and South Korean forces were nearing the end of the 10-day annual Ulchi Freedom Guardian joint exercises, which the North regards as a rehearsal for invasion.

US President Donald Trump later insisted that "all options" were on the table in an implied threat of pre-emptive military action, while on Thursday US heavy bombers and stealth jet fighters took part in a joint live fire drill in South Korea intended as a show of force.

In phone call on Friday, Trump and his South Korean counterpart Moon Jae In agreed to enhance Seoul's deterrence against North Korea by boosting its missile capabilities, Yonhap reported, citing Seoul's presidential office, Cheong Wa Dae.

"The two leaders noted the need to strengthen the Republic of Korea's defence capabilities to counter provocations and threats from North Korea, and reached an agreement in principle to revise the 'missile guideline' to the extent hoped by the South Korean side," Yonhap quoted Cheong Wa Dae spokesman Park Soo Hyun as saying.

Tensions on the Korean Peninsula are at their highest point in years after a series of missile tests by Pyongyang.

South Korean President Moon Jae In has previously urged limits on Seoul's missiles to be loosened in a conversation with Trump.

Seoul is currently allowed to possess ballistic missiles with a range of 800km and payload of 500kg, but it wants the weight limit raised to 1,000kg.

The Pentagon had said it was "actively" considering the revision.

Calls are also mounting in the South for Seoul to build nuclear weapons of its own to defend itself as nuclear-armed North Korea's missile stand-off with the US escalates.

The South, which hosts 28,500 US troops to defend it, is banned from building its own nuclear weapons under a 1974 atomic energy deal it signed with Washington, which instead offers a "nuclear umbrella" against potential attacks.

Yonhap added that the two leaders reaffirmed the need to bring Pyonyang back to the dialogue table by applying maximum sanctions and pressure.

However, Trump said after the latest missile test that negotiations with Pyongyang were "not the answer".