Earlier this week currency and stock markets more or less took North Korea’s nuclear device test detonation in stride – ditto the short-range missile tests. Today feels different. Pyongyang has just said it might act militarily as South Korea joins the U.S.-led, anti-nuclear Proliferation Security Initiative. It also issued some other provocative statements, including that it won’t guarantee the safety of offshore shipping traffic. North Korea’s harsh warning comes in the wake of its first detonation since 2006 - and a much bigger one – and an unusual cluster of short-range missile firings. It amounts to an escalation of tensions which investors have to consider factoring into their decisions. A WSJ op-ed by three American elder statesmen calls for President Obama to lead a renewed deterrance effort involving Russia and China. The fact that Beijing responded to Monday’s nuclear detonation with strong words for Pyongyang may be a sign it will participate fully in a U.S.-led effort. Here’s the piece: http://online.wsj.com/article/SB124338405214956695.html Continue reading…
Kospi
Latest Update: It has now emerged that North Korea tested three short-range missiles today in addition to a nuclear device which it detonated underground (which was initially detected as an earthquake; see below.) Markets continue to take the news in stride, with South Korea’s won the main victim and the yen also under pressure, given Japan’s proximity. (That said, markets are thin today because the U.K. and U.S. are on holiday.) Does this relatively unusual cluster of test firings/detonations mean North Korea’s neighbors are in greater danger than before? In the recent past, North Korea has tended to conduct such tests in isolation. The country’s first and only other known nuclear device test was in October 2006, according to DJN. Pyongyang claims today’s device was bigger than the first. A long-range missile was tested in April. At the time, North Korea described it as a “satellite” but various governments identified it as a missile. As governments roundly condemn today’s developments, arms control experts will surely puzzle out the deterrance issue in the context of a political transition under way in North Korea. This WSJ story by Jay Solomon, Evan Ramstad and Peter Spiegel is very illuminating: “North Korea Plans Kim Succession, U.S. Believes.” http://online.wsj.com/article/SB124304434715249127.html
Earlier Update: North Korea has also test-fired a short-range missile. The WSJ says a statement from the country’s state-run media refers to the government’s ”military first” policy, which is known as Songun. This would seem to support analysts’ views that the North Korean military’s power is on the ascent.
Earlier: DJN’s flashing news that North Korea may have tested a nuclear device. It appears the nuclear test caused rumblings so strong that the U.S. Geological Survey tentatively detected a temblor registering 4.7 on the Richter scale. South Korea’s Yonhap news agency says the Seoul government detected an “artificial earthquake” – suggesting the quake was actually the aftermath of a North Korea nuclear test. The Kospi (Korean stock market index) slid as did the won. The Korean stock exchange is now halted. Continue reading…
