All Quiet on the Eastern Front?

A North Korean ballistic missile was fired yesterday, whose trajectory went over the centre of Japan before it was ditched in the Pacific Ocean to the east of Japan. This was a hugely provocative act: yet the Japanese stock market was unaffected by the news: the main index fell by less than 100 points,and that can be attributed to a number of minor technical adjustments within the market. There is no reason to think that the news story had an impact on the market.

Japanese ministers again mentioned the possibility of reviewing defence policy, which has been constrained since 1945 by the terms of the treaties that followed the Japanese surrender at the end of the Second World War; but no immediate action was taken.

Commentators on the world's stock markets have felt the need to comment on this lack of any response in the level of stock and share prices to a significant demonstration of the rogue state's rapidly developing power to attack its neighbours, which is regarded as, a side-issue to its plan to develop the capability to attack the continental USA. The general view is that the main markets [in the the Americas, in Europe including the UK, and in Asia] are all in a euphoric condition, carried ever-forward by the massive creation of 'money' by the central banks over the past decade. The cautious withdrawal of the policies by which the capitalist system was 'saved' in 2008-9, by the US Federal Reserve over recent months has not affected that highly positive set of conditions for dealers and players in the global market.

Two other factors are in play. The first is, that if there were to be any direct action by the USA or by any other threatened power against North Korea the consequences would be calamitous and totally unpredictable. The possibilities of a thermonuclear response by North Korea to an attack by the US Air Force, using high explosives in an attempt to destroy buried facilities are so enormous that nobody can assess the effects that would ensue: so the possibility cannot be factored in to stock market price adjustments. The second factor is that governments in the region appear to assume that the Chinese have the power forcibly to 'discipline' North Korea, and would use it, if they judged that the situation really needed it.

Inevitably, it has already been announced that the United Nations Security Council will meet this afternoon, for another session of tut-tutting and to allow the main players to make their positions even clearer and for the North Koreans to say - as ever - that they do not care what the UN says or does.

North Korea has land borders with South Korea, China and Russia. North Korea was created by Stalin's USSR, before the Peoples' Republic of China was established. The position of Russia in relation to North Korea is no less important now than it was in 1950 at the time of the Korean War. Though Chinese troops rather than Soviet forces actually entered the land war, the supplies for the Communist side came from the USSR. It is inconceivable that Mr Putin is not hugely influential in Pyongyang, though the connection is downplayed in the public discussion of the matter; and lazy commentators have taken the view that the North Korean dictator pays little attention to Russia. It will be very important to take note of exactly what the Russian delegate says in the Security Council today: the nuance will matter. The state of US-Russian relations is important in what happens in North Korea, and pretty well the whole of the US political system is in a dangerously anti-Russian frame of mind at present. This does not play out in the calculations of the world's stock markets, but it is a factor not to be forgotten