The North has moved two missiles to its east coast and South Korea is on alert.
Speaking in Seoul, Mr Kerry reconfirmed the US's commitment to protecting itself and its allies.
But he played down a US report that the North has a nuclear warhead, saying it was "inaccurate" to suggest it has "a working and tested" device.
Later, White House spokesman Jay Carney said Pyongyang had "not demonstrated the capability to deploy a nuclear-armed missile".
A declassified section of a report from the Defense Intelligence Agency (DIA) report had warned there was "moderate" confidence that Pyongyang had developed the technology to mount a nuclear warhead on a missile.
By Kim GhattasBBC News, Seoul
'Stern test' for Kerry over Korea
Japan readies for N Korea attack
Chinese media on North Korea
North Korea has increased its warlike rhetoric following fresh UN sanctions imposed after its third nuclear test in February and joint military manoeuvres by the US and South Korea.
The North has said it will restart a mothballed nuclear reactor, has shut an emergency military hotline to the South and has urged countries to withdraw diplomatic staff, saying it cannot now guarantee their safety.
On 15 April, North Korea will mark the birth of national founder Kim Il-sung , a date which could be used for a missile launch.
North Korean TV has been showing preparations for the birthday celebrations, which include displays of "Kimilsungia" flowers, parades, and models of missiles.
By Ian Pannell,BBC News, Washington
Does North Korea have a nuclear weapon capable of being fired on a ballistic missile? Someone in America's vast intelligence community thinks the answer is "Yes" - well "probably Yes", as analysts do not like absolutes.
They also think it would not be very reliable.
This is a deeply sensitive area and with recent history in mind, no-one wants to be accused of "sexing-up" intelligence.
The honest answer is that no-one outside of a small group of people in Pyongyang actually knows what capability North Korea has. It is also true that, as with most conflicts, there are always hawks and doves and people with competing agendas. For now at least this probably remains one of former US Defence Secretary Donald Rumsfeld's infamous "known unknowns".
Recently, the North reportedly moved two Musudan ballistic missiles to its east coast. Estimates of their range vary, but some suggest the missiles could travel 4,000km (2,500 miles).
That would put US bases on Guam within range, although it is not believed that the Musudan has been tested before.
In a joint news conference with his South Korea counterpart, Mr Kerry said that if Northern leader Kim Jong-un decided to go ahead with a launch it would be "a provocative and unwanted act that will raise people's temperature".
"It is a huge mistake for him to choose to do that because it will further isolate his people ... who are desperate for food not missile launches, who are desperate for opportunity not for a leader who wants to flex his muscles in this manner," he said.
"Kim Jong-un needs to understand - and I think he probably does - what the outcome of a conflict would be," he added.
Mr Kerry said that in his talks with South Korean President Park Geun-hye she had made clear her "bright vision" of a peaceful Korean peninsula free of nuclear weapons.
"We are prepared to work with conviction that relations between the North and South can improve and can improve very quickly," he said.
"The world will be much better off if the leaders of the North, and one leader in particular, can make the right decision."
Russia, which has expressed growing concern over North Korea, said on Friday that it had issued "an urgent appeal" to Pyongyang "to refrain from actions which could lead to further escalation of tension".
Missile defences in the region
North Korea's missile programme
On Saturday Mr Kerry will move on to China. He said he would urge leaders there to use their influence to rein in Pyongyang's aggression. He will then travel to Japan.
Mr Kerry said it was "clear to everybody in the world that no country in the world has as close a relationship or as significant an impact on [North Korea] than China", and that talks there would aim to "lay out a path that will defuse this tension".
China, like the US, wanted denuclearisation, he said, adding: "If that's your policy, you've got to put some teeth into it."
On Thursday, China carried out a civilian emergency drill in a town near its border with the North.
China's state media said the half-hour exercise covered evacuations and responses to an air raid and was aimed at raising public awareness of disaster prevention and relief.
US Secretary of State John Kerry has said an anticipated missile launch by North Korea would be a "provocative act" and "huge mistake".