North Korea has warned that it will regard any economic sanctions imposed by Japan in response to an ongoing kidnap row as a "declaration of war".
Tokyo is furious over the issue of Japanese abducted by the North
The Japanese government has already suspended food aid to North Korea as a result of the dispute.
Tokyo was outraged after human remains provided by North Korea were not those of a kidnapped Japanese woman.
North Korea has said it kidnapped some Japanese to train its spies, but denies any are still alive in the North.
A Japanese government official said sanctions against North Korea were one of the measures Tokyo was considering, but it first wanted to analyse all the information on missing Japanese nationals that its officials gathered during a visit to the North last month.
He said the decision would be made by the end of the year.
Snatched in the '70s and '80s
Used as cultural trainers for N Korean spies
Five allowed home in 2002
Five children now freed from N Korea
Eight said to be dead, others missing
Sanctions could involve restricting Japanese port calls by North Korean vessels, remittances from Koreans living in Japan to the North, and imports of North Korean foods such as sea food and specialist mushrooms.
Pyongyang accused Japan of falsifying the tests to damage ties and said that if sanctions were imposed, it would hit back with an "effective physical response". The impoverished state relies heavily on contributions from Korean nationals in Japan.
"If sanctions are applied against the DPRK (North Korea)... we will regard it as a declaration of war against our country and promptly react to the action by an effective physical method," a statement carried by the official Korean Central News Agency said.
The statement said North Korea would also reconsider taking part in six-nation talks on its nuclear programme if Tokyo halted aid shipments. The Japanese government said earlier this week that as a result of the abduction row, it would hold back half of the 250,000 tonnes of food aid it promised North Korea in May.
More than six million North Koreans rely on foreign food aid for basic sustenance. Japan's gift has made it one of the North's most generous recent donors, but the North has survived Japanese freezes in the past. Before it promised the lump sum earlier this year, Tokyo had not pledged food aid to North Korea since 2001.
Any moves to change Japan's financial relationship with North Korea, however, are unlikely to be supported by Washington and other Japanese allies, as this would complicate the multinational talks process under way with Pyongyang.
But pressure is mounting within Japan for action against its impoverished neighbour.
Last week, DNA tests showed that bones provided by North Korea to prove that a missing Japanese woman, Megumi Yokota, was dead, did not belong to her but to several other people.
Pyongyang admitted kidnapping her in 1977 but said she committed suicide in 1984. Many in Japan, including her parents, are suspicious and believe she is still alive.
Some believe she is being detained because she knows too much about the secretive country.
Japanese Prime Minister Junichiro Koizumi suggested the latest threats from North Korea might be part of a political strategy.
"We have to look carefully at what their true intentions are," he told reporters.
Pyongyang admitted in 2002 to abducting 13 Japanese nationals in the 1970s and 80s, who were to be used as cultural trainers for North Korean spies.
Five were allowed to return to Japan in 2002, while North Korea said the others had died or never entered the country.