Ok, well this is interesting.
Nikkei is out reporting that Japan is planning for a possible mass evacuation of some 60,000 Japanese citizens currently living in or visiting South Korea.
“If the U.S. decided on a military strike against the North, the Japanese government would start moving toward an evacuation on its own accord regardless of whether the American plans are public,” a Japanese government source is quoted as saying.
Apparently, there are four levels to the plan that correspond to the severity of the threat. Here’s Nikkei again:
Tokyo is working on a four-tier emergency plan based on the severity of the situation: discouraging unessential travel to South Korea, discouraging all travel to South Korea, urging Japanese citizens there to evacuate, and finally, urging them to shelter in place.
Note the bolded bit above. Simply put: if you start seeing Japan bringing its citizens home, Trump may have already made a decision.
As usual, the irony here is that Japan wouldn’t exactly be the safest place to be in the event an actual war broke out. For evidence of that, look no further than all of the graphics making the rounds that show the range of Pyongyang’s missiles or simply refer to the rather unfortunate incident that occurred just last week, when a missile literally flew over Japanese territory.
As we and plenty of other folks have noted over the past month, the geography here is likely to mean that in a real pinch, the yen will lose its safe haven status as investors flee to gold and the franc. Here’s Bloomberg from a short piece out on Monday:
When it comes to hedging geopolitical risks surrounding the Korean peninsula, the Swiss franc seems to be gaining in popularity. One-week implied volatility on the franc, which measures expected swings in the currency, is climbing above the yen’s as Japan’s geographical proximity to North Korea stokes demand for a non-Asian hedge.
Meanwhile, to let AMP Capital’s Nader Naeimi tell it, it’s just a matter of time before the tension reaches some kind of tipping point, beyond which risk assets will selloff en masse.
“Markets need a correction,” Naeimi tells Bloomberg, adding that “there is a significant disconnect between uncertainty and market pricing of risk. North Korea and other events will provide the triggers for a correction.”
He’s 30% in cash, long gold, and short EMFX.
Oh, and his fund has beaten 77% of peers over the past 12 months.