By David Chance and Jack Kim
SEOUL | Mon Dec 19, 2011 10:51am EST
(Reuters) - North Koreans poured into the streets on Monday to mourn the death of iron leader Kim Jong-il as state media hailed his untested son as the "Great Successor" of the reclusive state whose atomic weapons ambitions are a major threat to the region.
Earlier a tearful North Korean television announcer, dressed in black and her voice quavering, said the 69-year old ruler died on Saturday of "physical and mental over-work" on a train on his way to give field guidance -- advice dispensed by the "Dear Leader" on trips to factories, farms and the military.
Security concerns over the hermit state, that in 2010 shelled civilians on a South Korean island and is blamed for the sinking of one of its warships earlier that year, were heightened after Seoul said the North had test-fired a short range missile prior to the announcement of Kim's death.
It was the first known launch since June and in a bid to calm tensions, South Korea's defense ministry said it might abandon plans to light Christmas trees on the border, something the North has warned could provoke retaliations.
North Korea's official KCNA news agency lauded Kim's youngest son, Kim Jong-un as "the outstanding leader of our party, army and people."
"We have esteemed comrade Kim Jong-un," KCNA led a dispatch that said North Koreans from all walks of life are in utter despair but were finding comfort in the "absolute surety that the leadership of Comrade Kim Jong-un will lead and succeed the great task of revolutionary enterprise."
But there was uncertainty about how much support the third generation of the North's ruling dynasty has among the ruling elite, especially in the military, and worry he might need a military show of strength to help establish his credentials.
"Kim Jong-un is a pale reflection of his father and grandfather. He has not had the decades of grooming and securing of a power base that Jong-il enjoyed before assuming control from his father," said Bruce Klingner, an Asia policy analyst at the Heritage Foundation in Washington.
"(He) may feel it necessary in the future to precipitate a crisis to prove his mettle to other senior leaders or deflect attention from the regime's failings."
Video from Chinese state television showed residents weeping in the North Korean capital Pyongyang. KCNA reported people were "writhing in pain" from the loss of the man who in 1994 assumed the leadership of the totalitarian state from his father Kim Il-sung, the North's first, and officially eternal, president.
Large crowds gathered at a massive memorial of Kim's father and state founder Kim Il-sung in central Pyongyang mourning the death of the "Dear Leader." Kim will be laid to rest next to his father, KCNA said.
The funeral of Kim, turned into a demi-god by his propaganda machine, will be held on December 28.
News of the death of the man whose push to build a nuclear arsenal left the North heavily sanctioned and internationally isolated, triggered immediate nervousness in the region, with South Korea stepping up its military alert.
China, the North's neighbor and only powerful ally, said it was confident the North would remain united and that the two countries would maintain their relationship.
"We were distressed to learn of the unfortunate passing of (Kim) ... and we express our grief about this and extend our condolences to the people of North Korea," Foreign Ministry spokesman Ma Zhaoxu was quoted by Xinhua news agency as saying.
"We are confident the North Korean people will be able to turn their anguish into strength and unify as one," he said.
While his father had 20 years as official heir, Kim Jong-un only became successor by taking on official titles last year, months after Kim Jong-il suffered a stroke around August 2008.
He takes over a hermit state whose economy has been ravaged by years of mismanagement under Kim Jong-il, who only briefly flirted with economic reform, preferring to stick with central planning and the brutal crushing of any opposition.
Under Kim Jong-il's rule, an estimated 1 million North Koreans died during famine in the 1990s. Even with good harvests, the state cannot feed its 25 million people.
Little is known of Jong-un, who is believed to be in his late 20s, studied for a short time at a school in Switzerland.
KCNA said Kim Jong-il died on Saturday after "an advanced acute myocardial infarction, complicated with a serious heart shock."
South Korea, still technically at war with the North, placed its troops and all government workers on emergency alert, but said there were no signs of any unusual North Korean troop movements.
The United States said it was committed to stability on the Korean peninsula as well as to its allies. There are some 28,000 U.S. troops on the divided peninsula. Across the heavily armed border, the North maintains an estimated 1 million troops, one of the world's largest standing armies.
Japan, too, said it was watching developments closely.
"We hope this sudden event does not have an adverse effect on the peace and stability of the Korean peninsula," Chief Cabinet Secretary Osamu Fujimura told a news conference after a hastily called ministerial meeting on security.
The fear of what might happen next in North Korea unsettled financial markets, with Asian shares and U.S. index futures falling. South Korean stocks tumbled as much as 5 percent, and the U.S. dollar gained. The Korean won fell 1.8 percent.
Kim Jong-un was at the head of a long list of officials making up the funeral committee, indicating he would lead it, and a key sign that he had taken, or been given, charge.
Zhu Feng, Professor of International Relations at Peking University, said it was clear the mechanism for transition was in place and working.
"The issue of primary concern now is not whether North Korea will maintain political stability, but what will be the nature of the new political leadership, and what policies will it pursue at home and abroad.
"In the short-term, there won't be new policies, only a stressing of policy stability and continuity. So soon after Kim Jong-il has died, no leader will dare say that an alternative policy course is needed," Zhu said.
But Chung Young-Tae at the Korea Institute of National Unification said there was "a big possibility that a power struggle may happen."
Kim Jong-il also promoted his sister and her husband, Jang Song-thaek, to important political and military posts, creating a powerful triumvirate.
Jang is seen as effective regent for the younger Kim. He holds a top position in the powerful Worker's Party providing some balance to the generals who have been seen as more hardline in pushing the North to develop an atomic arsenal.
Earlier this decade, Jang was forced into exile for what is thought to have been conflict over his push for economic reform.
Experts say Jong-un has the intelligence and leadership skills that make him suitable to succeed his father. He is also reported to have a ruthless streak that analysts say he would need to rule North Korea.
North Korea, which tested a nuclear device in 2006 and again in May 2009, is seen as one of the greatest threats to regional security.
Last year, the secretive North unveiled a uranium enrichment facility, giving it a second route to make an atomic bomb along with its plutonium program.
Victor Cha, a Korea expert with the Center for Strategic and International Studies think-tank in Washington, said communication among China, the United States and South Korea was vital.
"Because these are the three key players when it comes to instability in North Korea. And the Chinese have been reluctant to have any conversations on this," he said.
"Now the situation really calls for it. It will be interesting to see how much the Chinese will be willing to have some sort of discussion."
(Additional reporting by Seoul, Washington and Asian bureaux, Editing by Jonathan Thatcher)