Japan scurried to prepare for the unexpected on Monday after news that Kim Jong-il, the leader of its unpredictable neighbour North Korea, had died of a heart attack.

I've issued three orders, which are to strengthen our intelligence gathering capability, to cooperate with officials from the United States, South Korea and China, and to be prepared for the unexpected, Prime Minister Yoshihiko Noda told reporters.

We cannot allow Kim's death to harm peace and stability on the Korean peninsula.

Ministers at a security meeting earlier on Monday reached no conclusion on whether to raise the level of alert for Japan's military.

Still, the government faces a tense end to the year as Noda prepares to visit China and complete important policies for the domestic economy, which include the budget for the fiscal year from next April and tax increases to cover welfare spending.

I ordered each division within the ministry to do their utmost in information gathering and in staying vigilant and watchful, a Defence Ministry spokesman quoted Defence Minister Yasuo Ichikawa as saying.

Chief Cabinet Secretary Osamu Fujimura stressed the need to watch risks related to the succession. At present, we have no confirmation on the successor but we're closely watching. According to the North Korean announcement, they will accept people expressing condolences from December 20 to 27 and the funeral will be held on December 28 in Pyongyang, he said.

Kim died of a heart attack on Saturday while travelling by train, state media reported on Monday, sparking immediate concern over who is in control of the reclusive state and its nuclear programme.

Japan's ties with North Korea, with which it has no diplomatic relations, have long been fraught due to Pyongyang's bitterness over Japan's 1910-1945 occupation of the Korean peninsula, Tokyo's worries about North Korea's missile and nuclear programmes, and Japanese anger over the abduction of its citizens by North Korean agents decades ago.

ANXIOUS WAIT

Talks to normalise ties between Tokyo and Pyongyang have been halted for years with the issue of the Japanese abductees, an emotional subject in Japan, a major obstacle.

Kim Jong-un, the youngest son of Kim Jong-il, was named by North Korea's official news agency KCNA as the great successor to his father. Little is known of Jong-un, who is believed to be in his late 20s and was appointed to senior political and military posts in 2010.

Kim's death could represent an opportunity as his stance was that the abduction issue had been resolved and there was no room for negotiation, said Shigeo Iizuka, who heads a group of families of abductees and whose younger sister was taken to North Korea in 1978 when she was 22.

However, there are still questions as to whether his successor will continue his father's dictatorship or whether he will change the country for its own sake.

The report of Kim's death grabbed immediate headlines in Japan, where newspapers issued extra editions.

Some Tokyo residents said they were concerned about what would happen next inside the borders of their unpredictable neighbour.

I am worried indeed. I am very interested in knowing how this will all turn out, 73-year-old retiree Kosuke Yoshimasa told Reuters.

Another retiree, Michiko Matsuzaki, 68, sounded a note of cautious optimism. I hope this will lead North Korea to become more democratic, she said.

Japan, like others in the region, will be watching to see what stance Pyongyang adopts towards the outside world following Kim Jong-il's death and whether Kim Jong-un can consolidate his power.

At present, when they are trying to firm up their internal regime they are more likely to prioritise firming domestic stability rather than trying to boost tension with the outside, said Tadashi Kimiya, a Tokyo University professor who specialises in Korean affairs.

If the government cannot exercise control there will be confusion and instability, he added.

Kimiya said he did not expect any sudden flood of refugees from North Korea headed for Japan, nor did he think Pyongyang's military was likely to take aggressive action.

Security was tight at the Tokyo headquarters of the General Association of Korean Residents of Japan, Pyongyang's de facto diplomatic mission in Japan, where a North Korean flag flew at half-mast.

Japan has about 400,000 permanent residents who are ethnic Koreans backing either Seoul or Pyongyang, many of them descendents of those brought to Japan as forced labour when the peninsula was a Japanese colony.

(Additional reporting by Elaine Lies and Stanley White; Writing by Linda Sieg; Editing by Michael Watson)