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Risk Fades On Report Japan Boosting Missile Defense Against "North Korea Threat"

Earlier we joked that today's rally was losing steam, and it "needs a North Korean ICBM launch to find new strength."

Well, there has been no new launch (yet), however according to several desks the reason why USDJPY has faded and why the risk bid has faded sending ES to session lows, is as a result of a Nikkei report that "Japan boosting missile defense to face North Korean threat" although a closer read leaves one skeptical if this is indeed the reason, considering the Nikkei is talking about long-term plans and nothing imminent, to wit:

Japan will overhaul its missile intercept command system starting in fiscal 2018 to cope with advancements in North Korea's weapons technology, such as faster-descending missiles launched at a steeper trajectory.

 

The Japan Aerospace Defense Ground Environment, or JADGE, detects incoming missiles via radar and combines that information with data from American military satellites and other sources to determine the rockets' trajectory and likely point of impact. If the missiles are expected to strike Japan, land- and ship-based interceptors are ordered to shoot them down.

 

But many believe the current system could have trouble dealing with high-powered missiles launched at a lofted trajectory, a method that sacrifices range for height and a speedy descent. The intercontinental ballistic missile that North Korea launched last Wednesday took such a path. Rapidly calculating a high-flying missile's speed and direction and determining whether it was launched by friend or foe requires a great deal of computing power, and "it is possible the current system would not be able to keep up" to intercept such a rocket, an official from the Ministry of Defense said.

 

JADGE will receive the additional power needed to make these judgments in an upgrade starting next fiscal year. The defense ministry is requesting 10.7 billion yen ($94.8 million) in the fiscal 2018 budget to make the changes, and hopes to fully deploy the upgraded version in fiscal 2022. By more quickly issuing the command to intercept, the system will have an easier time neutralizing missiles on a lofted path.

The Nikkei adds that Japan is building up other aspects of its missile defense as well: "It is jointly developing with the U.S. the next-generation SM-3 Block IIA Interceptor missile, targeting deployment on Japan's Aegis destroyers starting in fiscal 2021. The interceptors will have a range of more than 1,000km, compared to several hundred for current-generation SM-3s."

Whether this is the reason why the S&P has faded nearly all of its gains is debatable with others suggesting that the previously reported news that the Freedom Caucus is "getting itchy" and may threaten a shutdown as it is "holding meeting before votes tonight as they opposed to gop leadership govt funding strategy" may be the catalyst behind the swoon.

Whatever the reason, the S&P has faded nearly all of its intraday gains, and was up just 5 points at publication time.

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Business
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Japan