VIENNA - The UN nuclear watchdog said it has seen releases of steam and water indicating that North Korea may be operating a reactor, in the latest update on a plant that experts say could make plutonium for atomic bombs.

North Korea announced in April of last year that it would revive its aged five-megawatt research reactor at the Yongbyon nuclear complex, saying it was seeking a deterrent capacity.

The isolated and poverty-stricken state defends its nuclear program as a "treasured sword" to counter what it sees as US-led hostility.

North Korea's nuclear program "remains a matter of serious concern", the International Atomic Energy Agency (IAEA) said in an annual report posted on the UN agency's website.

The Vienna-based IAEA continued to monitor developments at Yongbyon through satellite imagery, it said.

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