North Korea conducted one of its most provocative ballistic missile tests earlier today, causing the markets to slide.
Investors are concerned that the latest test will provoke reactions from the US, particularly as the last time the communist nation tested a missile, the two states were threatening each other with nuclear war.
In today’s test, North Korea fired a ballistic missile over Japan’s northern Hokkaido island into the sea. This is the first time Pyongyang has chosen to fire a missile over mainland Japan.
What has the international reaction been?
Japan’s prime minister, Shinzo Abe, told reporters:
North Korea’s reckless action is an unprecedented, serious and a grave threat to our nation.
US president Donald Trump told Abe he was “100 percent with Japan”.
South Korea’s president Moon Jae-in said that he and the US were discussing deploying additional “strategic” assets on the Korean peninsula.
Why did North Korea hold the test?
Kim Jong Un reportedly ordered the test in response to the US and South Korea conducting annual military exercises on the peninsula.
In addition, the state appears to be still angry about the United Nations sanctions that have been imposed on it since early August.
A North Korea official, Rodong Sinum, said:
The US should know that it can neither browbeat the DPRK (Democratic People’s Republic of Korea) with any economic sanctions and military and blackmail nor make the DPRK flinch from the road chosen by itself.
What has happened in the markets?
Japan’s Nikkei 225, Japan’s version of the Dow Jones Industrial Average, closed down 0.45 percent earlier today. As well, South Korea’s stock exchange, the Kospi, lost 0.23 percent at the day’s end.
When the US markets open later today, the Dow Jones is expecting a 118 point decline as a result of the actions by North Korea and the aftermath of Hurricane Harvey, the worst storm to hit the US in 12 years.
However, gold is currently trading at a nine-month high. Investors are choosing to put their money in the precious metal because of market uncertainties over international relations.