South Korea’s president, Moon Jae-in, has warned that the crisis on the Korean peninsula risks becoming “uncontrollable” as Asia-Pacific stocks tumbled for the third day running.
“The global political situation has become very serious due to North Korea’s repeated provocations,” Moon told the Russian president, Vladimir Putin, during bilateral talks in Vladivostok on Wednesday.
According to South Korean media, Moon asked Putin to help “tame” North Korea, as the international community considers its response to Pyongyang’s sixth nuclear test on Sunday.
There was further evidence that North Korea has made significant progress in its nuclear programme, with Japan saying it had revised upwards the estimated yield from Sunday’s bomb to 160 kilotons – making it more than 10 times bigger than the Hiroshima bomb.
“This is far more powerful than their nuclear tests in the past,” Japan’s defence minister, Itsunori Onodera, told reporters.
The figure was based on a revised magnitude by the Comprehensive Nuclear Test Ban Treaty Organisation.
Japan’s revised estimate is far greater than the 50-100 kiloton yield given by the UN security council. The council is due to vote on Monday on a resolution condemning the North’s recent test, but there are signs of division over how to respond.
Putin has said he opposes fresh economic measures against the regime. While he condemned North Korea’s provocations, Putin said further sanctions would be useless and ineffective, describing the measures as a “road to nowhere”.
China, too, opposes any measure – namely an oil embargo favoured by the US and Japan – that could foment a domestic crisis big enough topple North Korea’s leader, Kim Jong-un, and potentially end the country’s status as a buffer between China and South Korea, where US forces are based.
Japan’s prime minister, Shinzo Abe, is expected to broach sanctions with Putin when they meet in Vladivostok on Thursday.
Geopolitical concerns continued to simmer following North Korea’s biggest-ever nuclear test on Sunday, with one of the country’s most senior diplomats saying that the US would receive more “gift packages” from the regime.“We have to make North Korea change its current policy and understand that there is no bright future if North Korea continues the present policy,” Abe told reporters before he left Tokyo.
Han Tae Song, the country’s ambassador to the United Nations in Geneva, confirmed that North Korea had successfully conducted its sixth and largest nuclear bomb test on Sunday.
“The recent self-defence measures by my country … are a gift package addressed to none other than the US,” Han told a disarmament conference in Geneva on Tuesday. “The US will receive more ‘gift packages’ … as long as it relies on reckless provocations and futile attempts to put pressure on [North Korea].”
Tensions between the US and North Korea continued to take their toll on markets in the region on Wednesday. The Nikkei share average fell 0.7% to a four-month low in Tokyo in early trading but had mounted a slight recovery by mid-afternoon. In Sydney, the ASX200 benchmark index plunged by the same margin as investors opted for safe havens such as gold and government bonds.
The South Korean benchmark index – the Kospi – was 0.35% lower on Wednesday in the fifth successive day of losses. Shanghai dropped 0.4% while Hong Kong’s Hang Seng retreated 1%.
The FTSE100 is due to slip by 0.4% when it opens on Wednesday morning.
The losses in Asia followed a selloff on Wall Street on Tuesday where the Dow Jones industrial average fell 1.1% to 21,753.31 in its worst day in almost three weeks.
Bank shares led the slide as bond yields slumped on the influx of cash into treasuries. Technology stocks, the biggest gainers this year, also pulled the market lower. Spot gold was 0.2% higher at $1,341.31 an ounce after touching $1,344.21 overnight, its highest since September 2016.
“The risk-off trade really is North Korea front and centre,” said Jeff Zipper, managing director of investments at US Bank Private Wealth Management. “Also you have the hurricane last week and the upcoming Hurricane Irma, so there’s a lot on the plate for the market to digest.”
The Nikkei suffered heavy selling when it opened for business on Wednesday, falling to 19,254.67, the lowest level since 1 May. It recovered to 19,349 points in the afternoon session or down 0.2%, but the continued strength of the yen, which is being forced up by the US dollar’s continued weakness, is weighing on the Nikkei’s export-heavy listings.
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