South Korean President Lee Myung-Bak on Monday urged North Korea to stop military "provocation" and work towards peace and cooperation on the divided peninsula.

"Nothing can be accomplished through provocations," he said in a Liberation Day speech marking the 1945 end of Japan's colonial rule over what was until then a unified Korea.

"Over the past 60 years, the South and North have lived in conflict. Now is the time to overcome it and open up an age of peace and cooperation," he said, urging the North to join in the pursuit of their "common prosperity".

Lee said that despite lingering cross-border tensions, the South would continue offering humanitarian aid to its impoverished neighbour where flooding due to heavy rainfall this summer has exacerbated food shortages.

"Humanitarian assistance for children in the North will continue. Humanitarian support to help it recover from natural disasters will also be continuously carried out," he said.

The Koreas faced renewed tension last week after the South accused the North of firing shells along the flashpoint Yellow Sea border, the scene of a deadly artillery attack in November.

The South said its marines fired warning shots last Wednesday in response to two shells fired by the North, which denied the charge, saying the sounds came from "normal blasting" from construction work.

The North accused Seoul of fabricating the latest incident as a pretext to justify annual US-South Korea joint military exercises due to begin on Tuesday.

US and South Korean officials described the exercises as defensive and routine, but the North denounced it as preparation for "a war of aggression".

Tension on the peninsula has been acute since the South accused the North of torpedoing a South Korean warship in March last year, with the loss of 46 lives -- a charge Pyongyang denies.

Lee also urged Tokyo to help forge "mature" bilateral ties by teaching youngsters about Japanese atrocities committed during colonial rule.

"Japan has a responsibility to teach its young generation the truth about what happened in the past," he said.

Older South Koreans still have bitter memories of Japan's harsh colonial rule.

Thousands of activists rallied in central Seoul on Monday against Tokyo's claim on South Korea-controlled islands.

A test flight by Korean Air over the islands, called Dokdo in Korea and Takeshima in Japan, reignited the decades-long dispute.

The activists chanted slogans including "Dokdo is our land!" and "Japan will sink if it keeps claiming Dokdo!".

Tokyo ordered public servants not to use Korean Air for a month after the flagship carrier carried out the test flight of its new aircraft in June.

Seoul earlier this month refused entry to three Japanese lawmakers who attempted to visit Ulleungdo, the closest South Korean territory to Dokdo.