Dec. 1 (Bloomberg) -- North Korea revalued its currency for the first time in 17 years to crack down on black market trading and curb inflation, South Korea’s Yonhap News Agency said, citing unidentified sources who trade with China.

Citizens must exchange 1,000-won notes with a new 10-won bill, Yonhap said. China’s state-run Xinhua News Agency also reported the revaluation, citing a verbal notice given to foreign embassies in Pyongyang. The North’s official Korea Central News Agency hasn’t mentioned the change and it isn’t clear whether it constitutes a revaluation or redenomination.

Revaluing the currency might help Kim Jong Il’s reclusive regime boost its economic output. North Korea aims to more than double its per capita income to $2,500 by 2012, Yonhap reported in September. State-run shops in Pyongyang will be closed for a week to allow the government to set new prices for commodities, Xinhua said.

“The latest measure can be seen as North Korea’s move to strengthen control over the domestic market by managing money supply,” Phillip Park, a professor at the Department of Political Science and Diplomacy of Kyungnam University in Seoul. “Inflation has always been a problem in North Korea.”

The South Korean government is checking on the report, Lee Jong Joo, a spokeswoman for the Unification Ministry, said by phone today in Seoul. “We’ve not seen any official announcement by North Korea on the reported measure,” as happened on previous occasions, she said.

A separate report in South Korea’s Chosun Ilbo said the policy shift was also designed to strengthen Kim’s succession plans. South Korea’s foreign minister said in August that he would prefer to hand over power in 2012, a year that marks his 70th birthday and 100 years since the birth of his father and the nation’s founder, Kim Il Sung.

The revaluation occurred yesterday, sparking a rush to exchange the currency for dollars or yuan, Yonhap said. North Korea revamped its currency four times between December 1947 and July 1992, according to the South’s Unification Ministry.

United Nations sanctions that followed North Korea’s second nuclear weapons test in May have tightened the screws on the country’s aid-dependent economy.

To contact the reporter on this story: Sungwoo Park in Seoul at spark47@bloomberg.net.

Last Updated: December 1, 2009 03:35 EST