In Seoul, the presidential Blue House spokesman confirmed that US President Donald Trump and his South Korean counterpart Moon Jae-in agreed to enhance the country's deterrence against North Korea by boosting its missile capabilities.
Pyongyang fired an intermediate-range Hwasong-12 over Japan early on Tuesday, which it said was a mere "curtain-raiser" for the North's "resolute countermeasures" against ongoing US-South Korean military drills.
It came as US and South Korean forces were nearing the end of the 10-day annual Ulchi Freedom Guardian joint exercises, which the North regards as a rehearsal for invasion.
President Trump has insisted that "all options" are on the table in an implied threat of pre-emptive military action, while on Thursday US heavy bombers and stealth jet fighters took part in a joint live fire drill in South Korea intended as a show of force.
President Trump and President Moon spoke on the phone Friday about North Korean's "continued destabilizing and escalatory behavior," the White House said in a statement.
"The two leaders agreed to strengthen our alliance through defense cooperation and to strengthen South Korea's defense capabilities. President Trump provided his conceptual approval of planned purchases by South Korea of billions of dollars in American military equipment," the statement said.
Park Soo-hyun, the spokesman for Seoul's presidential office, said the leaders had reached an agreement in principle to loosen- "to the extent hoped by the South Korean side"- limits on the South's ballistic missile capability.
Under a bilateral agreement with the United States, Seoul is currently restricted to ballistic missiles with a maximum range of 800 kilometres (500 miles) and payload of 500 kilogrammes (1100 pounds).
Signed with the US in 2001- the year South Korea joined the Missile Technology Control Regime (MTCR)- the agreement initially limited Seoul to rockets with a range of just 300 kilometres, due to US concerns about triggering a regional arms race in Northeast Asia.
However, after a long-range rocket test by North Korea in 2012, Seoul managed to negotiate the near three-fold increase in the range limit to 800 kilometers, putting North Korean military facilities which were previously out of range within reach, as well as parts of China and Japan.
Tensions on the Korean Peninsula are at their highest point in years after a series of missile tests by Pyongyang.
Calls are also mounting in South Korea for Seoul to build nuclear weapons of its own to defend itself as nuclear-armed North Korea's missile stand-off with the US escalates.
The South, which hosts 28,500 US troops to defend it, is banned from building its own nuclear weapons under a 1974 atomic energy deal it signed with Washington, which instead offers a "nuclear umbrella" against potential attacks.
Spokesman Park Soo-hyun said the two leaders reaffirmed the need to bring Pyongyang back to dialogue by applying maximum sanctions and pressure.
However, President Trump said after the latest missile test that negotiations with Pyongyang were "not the answer."