The United States and North Korea are near a compromise to save a crumbling nuclear deal, news reports said on Friday, while Japan said it could accept rewarding the North by taking it off a US terrorism blacklist.

Indications of a fresh deal came as North Korea has raised the stakes in the nuclear negotiations by apparently making saber-rattling moves and barring U.N. monitors from its Soviet-era plant that makes bomb-grade plutonium.

ABC news quoted senior US officials as saying the North may be preparing for another nuclear test after it was seen moving cables and tunneling at the site of its only previous test in October 2006.

South Korean daily Chosun Ilbo on Friday quoted government sources as saying North Korea and the United States were near an agreement on verifying Pyongyang's account of its nuclear program that would prompt Washington to soon remove it from a list of countries that sponsor terrorism.

The Washington Post reported on Thursday that the Bush administration looked set to provisionally remove the North from the State Department's terrorism blacklist, as early as Friday.

The disarmament deal appeared to be in peril after Pyongyang, angry at not being removed from the list, vowed last month to rebuild its Yongbyon nuclear plant. Once removed from the list, the isolated North would see an end to many trade sanctions.

Japan has previously voiced its reservations, feeling that it may not be an appropriate move to make without first resolving a long-simmering feud over Japanese nationals kidnapped decades ago by North Korean agents.

Japan's foreign minister said he did not know if the United States would go ahead with delisting, but that he would not see it as a problem if it was deemed as yielding results.-Reuters