Some 40,000 South Korean and US troops are to participate on land, sea and air in the exercises called Ulchi-Freedom Guardian.
Pyongyang also said that "no one can guarantee that the exercise won't evolve into actual fighting", according to South Korea's Yonhap News Agency. Pyongyang's state media on Sunday called this year's drills a "reckless" move that could trigger the "uncontrollable phase of a nuclear war".
This year, 17,500 US troops, including 3,000 overseas reinforcements, will participate, whereas last year, 25,000 American troops, including 2,500 overseas reinforcements, joined the drill. North Korea, for its part, threatened to launch missiles toward the American territory of Guam before its leader Kim Jong Un backed off saying he would first watch how Washington acts before going ahead with the missile launch plans. Going against President Trump's threat of "fire and fury", Bannon suggested Trump should tone down the brinkmanship with North Korea and focus on China instead.
Tillerson said in Washington the United States wanted dialogue with Pyongyang, but only if it were meaningful.
However, chief White House strategist Steve Bannon said there was "no military solution" to North Korea's nuclear threats because of the North's massed artillery targeting the South Korean capital.
Among North Korea's capabilities in the field, USA intelligence officials have said it likely can produce its own missile engines and does not need to rely on imports.
North Korea views the regular exercises as preparations to invade it.
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South Korean President Moon Jae-in again urged the United States Monday to refrain from taking any action against North Korea that could start an armed conflict on the peninsula, saying even the slightest conflict here may cost the lives of many South Koreans and US troops. The China Daily, in an editorial posted yesterday, said it was "regrettable" that the US has so far rejected the dual suspension proposal.
The North has a track record of protesting the drills with armed provocations.
Prime Minister Malcolm Turnbull earlier this month said Australia and the United States were "joined at the hip", and pledged Australia would come to the aid of its ally if there was an attack by North Korea.
Defense Secretary James Mattis said the reduction in numbers simply reflects a need for fewer personnel, and hasn't been scaled back in response to tensions with North Korea.
Last month, Pyongyang tested two long-range rockets, which experts saidbrought major United States cities within range.
As North Korean propaganda dominates outsiders' perception of its people's inner life, Thae provided a glimpse into a system that is heavily policed, but ultimately fragile.
General Jeong Kyeong Doo, chairman of the Joint Chiefs of Staff (JCS), stressed that the current security conditions on the peninsula are "more serious than at any other time" amid the North's fast-advancing nuclear and missile programmes.
"But, knowing that North Korea sits with a significant capability already within their grasp, I think it is only prudent that they fully understand the consequences, should they make a bad choice for themselves". The question is how strong it will be.