North and South Korea agreed on Sunday to hold ministerial talks in Seoul in mid-August, in a new bid to resume halting efforts at reconciliation in tandem with fresh U.S. and Japanese dialogue with the communist North. South Korea's Unification Ministry said in a statement, issued after officials from the rival states met for the first time in four months, that Pyongyang had reiterated its regret over a deadly sea battle and agreed to cabinet-level talks from August 12 to 14 to discuss economic and family exchanges.

North Korea also agreed to send a team to the Asian Games to be held in South Korea's second-largest city, Pusan, from September 29 to October 14, the statement said. The two neighbours confirmed plans to play friendly soccer matches in Seoul in September.

"The talks provided the occasion to get the inter-Korean relations back on track by setting the date and the agenda for the ministerial talks," the ministry said.

The North's state-run Korean Central News Agency said the meeting was important in "improving the overall inter-Korean ties on the track of reconciliation, cooperation and reunification".

The mid-August talks will take place as the impoverished North tries to improve ties with the United States and Japan and to jumpstart a failing economy that has seen tens of thousands of deaths from famine and thousands of refugees fleeing to China.

On a major sticking point -- the June naval clash that killed 18 sailors on both sides and strained relations -- the statement said North Korea confirmed its "regret" and pledged to prevent any such future incidents.

PHOTO CAPTION

South Korea's unification minister Jeong Se-hyun (C) and his delegates Rhee Bong-jo (L) and Soh Young-kyo are pictured in Seoul on August 2 before leaving for talks with North Korea. REUTERS/Lee Jae-won