Japan’s Prime Minister Shinzo Abe called North Korea’s latest launch an “unprecedented, serious and significant threat,” and markets appeared to agree. South Korea also warned that it was gearing up its military to hit back at the North, if necessary.
“Markets are on the defensive, fearing an escalation in tensions in Northeast Asia,” Singapore-based bank DBS said in a note on Tuesday.
It said there was “no guarantee that U.S. President Donald Trump will refrain from fiery rhetoric in his response.”
But for now, the reason markets haven’t reacted more strongly to North Korea’s behavior is that they’ve become accustomed to the nuclear pariah’s antics.
“The very simplistic and glib answer is we’re just getting used to this. We’re inured to North Korea’s saber-rattling,” Rob Carnell, head of research for Asia at Dutch bank ING, said on Tuesday.
He noted that North Korea always fires over the sea in a “pretend alarmist” move, and markets may feel that there’s no real reason to get too concerned.
Carnell also said that excluding the U.S. president, American politicians and officials were making softer remarks, suggesting that it may be possible to get North Korea back to the negotiating table again.
“North Korea may be trying to cement its strength before making some concessions,” he said.