Will North Korea resume nuclear talks?

North Korea may try to raise the stakes. If the North resorts to its usual brinkmanship, there will likely be missile tests, military provocations toward the South and perhaps another nuclear test.

What Is The Impact On Markets?

Short-lived military grandstanding that results in little to no damage, such as a missile launch or the exchange of artillery fire as happened late last month, usually leads to quick blips in foreign exchange and stock trading that have no lasting impact.

They dampen sentiment and serve as a reminder of the risks of investing in the divided peninsula. Financial analysts say markets would only really worry if there were signs of serious armed confrontation.

What Are The Economic Pressures On Pyongyang?

U.N. sanctions have cut into the North's arms trade, which estimates said earned the state with a US$17 billion a year economy about US$1 billion annually.

A currency reform imposed late last year that was aimed at reasserting the government's control over the economy triggered inflation and led to rare civil unrest, putting pressure on Kim to ease some of the economic strain on his impoverished people.

China, the North's main benefactor, is willing to help with economic assistance to prop up Kim's leadership but the U.N. sanctions mean Beijing would be reluctant to do so openly and may only do so on condition that the neighbor returns to the six-party nuclear talks hosted by China.

North Korea may also try warming up to South Korea, which once supplied about US$1 billion a year in aid. Seoul cut off the unconditional handouts about two years ago and said aid would only come once the North abandons its atomic ambitions.

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