International Response

Japan, ROK agree nuke test a threat

(China Daily)
Updated: 2006-10-10 06:19

SEOUL: The Republic of Korea's (ROK) President Roh Moo-hyun said yesterday the nuclear test in the Democratic People's Republic of Korea (DPRK) could spark an atomic arms race.

Japanese Prime Minister Shinzo Abe said he and Roh had agreed in talks in Seoul that a DPRK nuclear test would constitute a grave threat to the region and the world.

Abe flew to Seoul yesterday to mend ties with his neighbour, but the trip was overshadowed almost as soon as he had landed by the DPRK's announcement that it had conducted a nuclear test.

"We agreed that if the DPRK's nuclear test is confirmed, it would be a grave threat not only to Japan and the ROK and neighbouring countries, but to international peace and security," Abe told a news conference after talks with Roh.

Abe also said Japan would immediately consider harsh measures in response and that he had told his government to seek UN Security Council talks on the issue.

Roh, speaking at a separate news conference, said: "In the long run, this is a dangerous play that could spark a nuclear arms build-up in other countries."

Analysts have said a DPRK's nuclear test would shake regional stability and give ammunition to Japanese hawks who want to beef up Japan's military, but that it would not necessarily lead to a nuclear arms race in North Asia.

Abe arrived in Seoul after fence-mending talks in China.

China, Japan and the ROK all agree the DPRK should end its nearly year-long boycott of six-country talks on ending its nuclear programme and all three had warned the North not to carry out a nuclear test.

Stock markets tumble

Stocks fell across Asia, Europe and in the United States yesterday after the DPRK said it carried out the nuclear weapon test.

The biggest falls were in Asia with the reaction in Europe, where many analysts remain more concerned about Iran's potential nuclear threat, more muted.

Dealers said, however, that investors regained some composure in late trade to allow stocks to finish off their early lows as the test sparked concerns over regional security and a likely sharp increase in tensions amid world-wide condemnation.

In the ROK, the KOSPI index was down 2.41 per cent after recovering from a near 4 per cent slump. The damage was also likely muted as Tokyo was closed yesterday for a public holiday, limiting the immediate impact.

The won also fell sharply from 949 on Friday to around 963 against the dollar as investors dumped the local currency.

Asian currencies were also generally lower as investors sought out the dollar as a traditional safe-haven, with further turbulence expected as the story unfolds.

ROK financial markets are most at risk, given that technically the country remains at war with the DPRK following the 1950-53 war, with Tokyo next in line as most exposed to any shocks.

Samsung Securities analyst Oh Hyun-Seok worried in Seoul that the market could go into free-fall if the United States were to undertake any military action, even on a small scale.

If "the US hits the DPRK militarily," judging a bottom for the market would be nigh impossible, he said.

In Hong Kong the benchmark slumped 1.27 per cent, Singapore fell 1.1 per cent and Sydney recovered some ground to close down 0.41 per cent. Losses were relatively modest in Jakarta, Bangkok, Kuala Lumpur, and Manila.

"The fear appears to have become a reality and that's really bad news for those holding won-denominated assets, including stocks," Korea Investment Securities analyst Kim Hak-gyun said.

He said geo-political tensions are now likely to increase as the world community responds to the news. "Now, you are facing something uncontrollable and politics will dictate the market (direction) for a while."

Meanwhile, Chinese share prices were not very much affected despite Beijing's strong condemnation of the test.

(China Daily 10/10/2006 page7)