Tag Archives: Japan

Japan, U.S., South Korea to hold missile tracking drill amid North Korea crisis

North Korean leader Kim Jong Un gives field guidance to various units in Samjiyon County, in this photo released by North Korea's Korean Central News Agency (KCNA) in Pyongyang

TOKYO (Reuters) – The United States, Japan and South Korea will hold two days of missile tracking drills starting on Monday, Japan’s Maritime Self-Defence Force said, as tensions rise in the region over North Korea’s fast-developing weapons programmes.

The United States and South Korea conducted large-scale military drills last week, which the North said made the outbreak of war “an established fact”.

North Korea has fired missiles over Japan as it pursues nuclear weapons and ballistic missiles in defiance of U.N. sanctions and international condemnation. On Nov. 29, it test-fired an intercontinental ballistic missile which it said was its most advanced yet, capable of reaching the mainland United States.

This week’s exercises will be the sixth drills sharing information in tracking ballistic missiles among the three nations, the defence force said.

It did not say whether the controversial THAAD system would be involved. The installation of the U.S. Terminal High Altitude Area Defense system in South Korea has angered China, which fears its powerful radar could look deep into China and threaten its own security.

North Korea’s missile test last month prompted a U.S. warning that North Korea’s leadership would be “utterly destroyed” if war were to break out. The Pentagon has mounted repeated shows of force after North Korean tests.

The United States has also pressured China and other nations to cut trade and diplomatic ties with North Korea, as part of international efforts to dry up Pyongyang’s illegal cash flows that could fund its weapons programmes.

On Sunday, South Korea said it would impose new unilateral sanctions on 20 institutions and a dozen individuals in North Korea, barring any financial transactions between those sanctioned and any South Koreans.

“This unilateral sanction will prevent illegal funds flowing to North Korea and contribute to reinforce international communities’ sanctions against North Korea,” South Korea’s finance ministry said in a statement.

The move is largely symbolic as trade and financial exchanges between the two Koreas have been barred since May 2010 following the torpedoing of a South Korean warship, which the North denied.

Japanese Defence Minister Itsunori Onodera said the ministry plans to include 730 million yen ($6.4 million) to help build a new missile interceptor system, the Aegis Ashore, in its next fiscal year budget request, public broadcaster NHK reported.

North Korea regularly threatens to destroy South Korea, Japan and the United States and says its weapons programmes are necessary to counter U.S. aggression. The United States stations 28,500 troops in the South, a legacy of the 1950-53 Korean War.

($1 = 113.4800 yen)

(Reporting by Kaori Kaneko, additional reporting by Haejin Choi in SEOUL, Editing by Nick Macfie)

U.S. envoy for North Korean affairs travels to Japan, Thailand

U.S. envoy for North Korean affairs travels to Japan, Thailand

WASHINGTON (Reuters) – The U.S. envoy for North Korea will travel to Japan and Thailand next week to discuss how to increase pressure on Pyongyang after its latest ballistic missile test, the U.S. State Department said on Friday.

North Korea, formally called the Democratic People’s Republic of Korea (DPRK), last week tested its most powerful intercontinental ballistic missile (ICBM), saying the device could reach all of the United States.

Joseph Yun, the U.S. special representative for North Korea policy, will travel to Japan and Thailand Dec. 11-15 to meet government officials “to discuss ways to strengthen the pressure campaign following the DPRK’s latest ballistic missile test,” the State Department said in a brief written statement.

“The United States looks forward to continuing its partnership with both these nations so that the DPRK will return to credible talks on denuclearization,” it added.

Tensions have risen markedly in recent months over North Korea’s development, in defiance of repeated rounds of U.N. sanctions, of nuclear-tipped missiles capable of reaching the United States.

Last week’s missile test prompted a U.S. warning that North Korea’s leadership would be “utterly destroyed” if war were to break out. The Pentagon has mounted repeated shows of force after North Korean tests.

The United States has sent mixed signals about its interest in talks with the North, with Secretary of State Rex Tillerson saying that Washington was pursuing such contacts but President Trump tweeting that this was a waste of time.

(Reporting by Arshad Mohammed; Editing by Toni Reinhold)

Japan to acquire air-launched missiles able to strike North Korea

Japan to acquire air-launched missiles able to strike North Korea

TOKYO (Reuters) – Japan is to acquire medium-range, air-launched cruise missiles, capable of striking North Korea, a controversial purchase of what will become the longest-range munitions of a country that has renounced the right to wage war.

Defence Minister Itsunori Onodera did not refer to North Korea when announcing the planned acquisition and said the new missiles would be for defence, with Japan still relying on the United States to strike any enemy bases.

“We are planning to introduce the JSM (Joint Strike Missile) that will be mounted on the F-35A (stealth fighter) as ‘stand-off’ missiles that can be fired beyond the range of enemy threats,” Onodera told a news conference.

Japan is also looking to mount Lockheed Martin Corp’s extended-range Joint Air-to-Surface Standoff Missile (JASSM-ER) on its F-15 fighters, he said.

The JSM, designed by Norway’s Kongsberg Defence & Aerospace , has a range of 500 km (310 miles). The JASSM-ER can hit targets 1,000 km away.

The purchase plan is likely to face criticism from opposition parties in parliament, especially from politicians wary of the watering down of Japan’s renunciation of the right to wage war enshrined in its post-World War Two constitution.

But the growing threat posed by North Korean ballistic missiles has spurred calls from politicians, including Onodera, for a more robust military that could deter North Korea from launching an attack.

Japan’s missile force has been limited to anti-aircraft and anti-ship munitions with ranges of less than 300 km (186 miles).

The change suggests the growing threat posed by North Korea has given proponents of a strike capability the upper hand in military planning.

North Korea has recently test-fired ballistic missiles over Japan and last week tested a new type of intercontinental ballistic missile that climbed to an altitude of more than 4,000 km before splashing into the sea within Japan’s exclusive economic zone.

(Reporting by Linda Sieg; Editing by Robert Birsel)

North Korea fires ballistic missile close to Japan: officials

North Korea fires ballistic missile close to Japan: officials

By Christine Kim and Mark Hosenball

(Reuters) – North Korea fired a ballistic missile that landed close to Japan on Wednesday, the first test by Pyongyang since a missile fired over its neighbor in mid-September, officials said.

North Korea launched the missile a week after President Donald Trump put North Korea back on a U.S list of countries that Washington says support terrorism. The designation allows the United States to impose more sanctions, although some experts said it risked inflaming tensions on the Korean Peninsula.

Japan’s government estimated that the missile flew for about 50 minutes and landed in the sea in Japan’s exclusive economic zone, Japanese broadcaster NHK said. An Aug. 29 missile fired by North Korea that flew over Japan was airborne for 14 minutes.

South Korea’s Joint Chiefs of Staff said Wednesday’s missile was fired from Pyongsong, a city in South Pyongan Province, at around 1817 GMT over the sea between South Korea and Japan.

Minutes after the North fired the missile, South Korea’s military conducted a missile-firing test in response, the South Korean military added.

The Pentagon said it had detected a “probable” missile launch from North Korea.

“We detected a probable missile launch from North Korea. We are in the process of assessing the situation and will provide additional details when available,” Pentagon spokesman Colonel Robert Manning told reporters.

Leading Japanese newspaper Asahi Shimbun quoted an unidentified government official as saying the missile did not cross over Japan and it fell into the Sea of Japan or on the Korean peninsula.

The White House said U.S. President Donald Trump was briefed while the missile was still in the air.

South Korean news agency Yonhap, citing South Korea’s Joint Chiefs of Staff, said the missile flew to the east and the South Korean military was analyzing details of the launch with the United States.

U.S. stocks pared gains after reports of the missile launch. The S&P 500 index was up half a percent in midafternoon.

Two authoritative U.S. government sources said earlier that U.S. government experts believed North Korea could conduct a new missile test within days.

After firing missiles at a rate of about two or three a month since April, North Korea paused its missile launches in late September, after it fired a missile that passed over Japan’s northern Hokkaido island on Sept. 15.

The U.S. officials who spoke earlier declined to say what type of missile they thought North Korea might test, but noted that Pyongyang had been working to develop nuclear-tipped missiles capable of hitting the United States and had already tested inter-continental ballistic missiles.

Last week, North Korea denounced Trump’s decision to relist it as a state sponsor of terrorism, calling it a “serious provocation and violent infringement.”

Trump has traded insults and threats with North Korean leader Kim Jong Un and warned in his maiden speech to the United Nations in September that the United States would have no choice but to “totally destroy” North Korea if forced to defend itself or its allies.

Washington has said repeatedly that all options are on the table in dealing with North Korea, including military ones, but that it prefers a peaceful solution by Pyongyang agreeing to give up its nuclear and missile programs.

To this end, Trump has pursued a policy of encouraging countries around the world, including North Korea’s main ally and neighbor, China, to step up sanctions on Pyongyang to persuade it to give up its weapons programs.

North Korea has given no indication it is willing to re-enter dialogue on those terms.

North Korea defends its weapons programs as a necessary defense against U.S. plans to invade. The United States, which has 28,500 troops in South Korea as a legacy of the 1950-53 Korean war, denies any such intention.

(Reporting by Christine Kim in Seoul, Linda Sieg and William Mallard in Tokyo, Mark Hosenball and Tim Ahmann in Washington; editing by Dan Grebler and Grant McCool)

Japan detects radio signals pointing to possible North Korea missile test: source

Japan detects radio signals pointing to possible North Korea missile test: source

TOKYO/WASHINGTON (Reuters) – Japan has detected radio signals suggesting North Korea may be preparing another ballistic missile launch, although such signals are not unusual and satellite images did not show fresh activity, a Japanese government source said on Tuesday.

After firing missiles at a pace of about two or three a month since April, North Korean missile launches paused in September, after it fired a rocket that passed over Japan’s northern Hokkaido island.

“This is not enough to determine (if a launch is likely soon),” the source told Reuters.

Japan’s Kyodo news agency reported late on Monday that the Japanese government was on alert after catching such radio signals, suggesting a launch could come in a few days. The report also said the signals might be related to winter military training by the North Korean military.

North Korea is pursuing its nuclear weapons and missile programmes in defiance of U.N. Security Council sanctions and has made no secret of its plans to develop a missile capable of hitting the U.S. mainland. It has fired two missiles over Japan.

South Korea’s Yonhap news agency, citing a South Korean government source, also reported that intelligence officials of the United States, South Korea and Japan had recently detected signs of a possible missile launch and have been on higher alert.

South Korean Unification Minister Cho Myoung-gyon told reporters on Tuesday there have been “noteworthy” movements from the North since its last missile launch in mid-September, but there was no hard evidence of another nuclear or missile test.

“North Korea hasn’t been engaging in new nuclear or missile tests but recently we’ve seen them persistently testing engines and carrying out fuel tests,” said Cho at a media event in Seoul.

“But we need some more time to see whether these are directly related to missile and nuclear tests.”

Asked about the media reports, Pentagon spokesman Colonel Robert Manning told reporters the United States continued to watch North Korea very closely.

“This is a diplomatically led effort at this point, supported by military options,” he said.

“The Republic of Korea and U.S. alliance remains strong and capable of countering any North Korean provocations or attacks.”

Two U.S. government sources familiar with official assessments of North Korean capabilities and activities said that while they were not immediately familiar with recent intelligence suggesting that North Korea was preparing to launch a new missile test, the U.S. government would not be surprised if such a test were to take place in the very near future.

Other U.S. intelligence officials noted North Korea has previously sent deliberately misleading signs of preparations for missile and nuclear tests, in part to mask real preparations, and in part to test U.S. and allied intelligence on its activities.

South Korea’s Cho said North Korea may announce the completion of its nuclear programme within a year, as it is moving more faster than expected in developing its arsenal.

North Korea defends its weapons programmes as a necessary defence against U.S. plans to invade. The United States, which stations 28,500 troops in South Korea, a legacy of the 1950-53 Korean war, denies any such intention.

(Reporting by Nobuhiro Kubo in TOKYO, Phil Stewart, Mark Hosenball and John Walcott in WASHINGTON, Soyoung Kim and Christine Kim in SEOUL; Writing by Linda Sieg; Editing by lincoln Feast and Nick Macfie)

Japan coast guard finds body of dead male suspected from North Korea

TOKYO (Reuters) – Japan’s Coast Guard found the body of a male and parts of a wooden boat suspected to be from North Korea on the coast of one of Japan’s outlying islands on Saturday, an official said.

The Coast Guard made the discovery around 6:30 a.m. on Saturday (2130 GMT on Friday) on Sado island, which is off the coast of Japan’s northwestern prefecture of Niigata, a coast guard official said, declining to give his name.

The guard also found a pack of cigarettes written in Korean and other personal belongings with Korean written on them near the body, the official said.

The cause of death is still unknown, the official said.

The discovery on Saturday marks the second time this month that parts of a wooden boat suspected to be from North Korea have washed up on the shores of Sado island, the official said.

Finding the body will add to the increasing unease in Japan and South Korea over North Korea’s nuclear arms program after U.S. President Donald Trump redesignated North Korea a state sponsor of terrorism, allowing the U.S. government to levy additional sanctions.

On Friday, police found eight North Korean men near a boat at a seaside marina in northern Japan. The men appeared to be fishermen whose boat had trouble, rather than defectors, the police said.

Last week, the Coast Guard rescued three North Korean men on a capsized boat in the Sea of Japan who said they were fishermen and were later sent home aboard a North Korean vessel.

A North Korean soldier dramatically defected to South Korea last week after being shot and wounded by his country’s military as he dashed across the heavily guarded Demilitarized Zone between the two countries.

(Reporting by Stanley White; Editing by Christian Schmollinger)

South Korea, Japan welcome U.S. relisting North Korea as sponsor of terrorism

South Korea, Japan welcome U.S. relisting North Korea as sponsor of terrorism

By Christine Kim

SEOUL (Reuters) – South Korea and Japan on Tuesday welcomed U.S. President Donald Trump’s move to put North Korea back on a list of state sponsors of terrorism, saying it will ramp up pressure on the reclusive regime to get rid of its nuclear weapons.

The designation, announced on Monday, allows the United States to impose more sanctions on North Korea, which is pursuing nuclear weapons and missile programs in defiance of U.N. Security Council sanctions. (Graphic: Nuclear North Korea – http://tmsnrt.rs/2lE5yjF)

“I welcome and support (the designation) as it raises the pressure on North Korea,” Japanese Prime Minister Shinzo Abe told reporters.

South Korea said it expected the listing to contribute to peaceful denuclearisation, the foreign ministry said in a text message.

North Korea has vowed never to give up its nuclear weapons program, which it defends as a necessary defense against U.S. plans to invade. The United States, which has 28,500 troops in South Korea, a legacy of the 1950-53 Korean war, denies any such plans.

In Beijing, Chinese Foreign Ministry spokesman Lu Kang said China had noted the reports on the U.S. decision.

“Currently, the situation on the Korean peninsula is complicated and sensitive,” Lu told a daily news briefing.

“We still hope all relevant parties can do more to alleviate the situation and do more that is conducive to all relevant parties returning to the correct path of negotiation, dialogue and consultation to resolve the peninsula nuclear issue.”

The move will further weigh on the “precarious situation” on the peninsula, China’s official Xinhua news agency said in an English-language editorial.

“The prospect of a nuclear-free Korean peninsula has been pushed farther away by one after another irresponsible action or blaring rhetoric,” it said.

This year’s rapid escalation of tension was largely down to a “game of chicken” between Washington and Pyongyang, it added.

Trump’s re-listing of North Korea as a sponsor of terrorism comes a week after he returned from a 12-day trip to Asia in which containing North Korea’s nuclear ambitions was a centerpiece of his discussions.

“In addition to threatening the world by nuclear devastation, North Korea has repeatedly supported acts of international terrorism, including assassinations on foreign soil,” Trump told reporters at the White House.

“This designation will impose further sanctions and penalties on North Korea and related persons and supports our maximum pressure campaign to isolate the murderous regime.”

Australian Prime Minister Malcolm Turnbull also backed Trump’s decision.

“Kim Jong Un runs a global criminal operation from North Korea peddling arms, peddling drugs, engaged in cyber-crime and of course threatening the stability of region with his nuclear weapons,” Turnbull told reporters in Sydney, referring to the North Korean leader.

Trump, who has often criticized his predecessors’ policies toward North Korea as being too soft, said the designation should have been made “a long time ago”.

North Korea was put on the U.S. terrorism sponsor list for the 1987 bombing of a Korean Air flight that killed all 115 people aboard. But the administration of former President George W. Bush, a Republican, removed it in 2008 in exchange for progress in denuclearisation talks.

Experts say the designation will be largely symbolic as North Korea is already heavily sanctioned by the United States.

On Monday, South Korean President Moon Jae-in’s special security adviser, Moon Chung-in, told reporters any such designation would be “more symbolic than substance”.

The United States has designated only three other countries – Iran, Sudan and Syria – as state sponsors of terrorism.

North Korea has said it plans to develop a nuclear-tipped missile capable of hitting the U.S. mainland. It has fired two missiles over Japan and on Sept. 3 conducted its sixth and largest nuclear test.

(Additional reporting by Jeff Mason and David Brunnstrom in WASHINGTON, Michael Martina and Philip Wen in BEIJING, Chang-Ran Kim in TOKYO and Jane Wardell in SYDNEY; Writing by Michael Perry; Editing by Nick Macfie and Clarence Fernandez)

Trump meets Japan, Australia leaders over trade, North Korea threat

U.S. President Donald Trump holds a trilateral meeting with Japan's Prime Minister Shinzo Abe and Australia's Prime Minister Malcolm Turnbull alongside the ASEAN Summit in Manila, Philippines November 13, 2017.

MANILA (Reuters) – U.S. President Donald Trump raised North Korea’s missile tests during talks on Monday with the prime ministers of Japan and Australia, and said “a lot” of progress had been made in negotiations on trade.

On the sidelines of a summit of East and Southeast Asian leaders in Manila, Trump met with Japan’s Shinzo Abe and Australia’s Malcolm Turnbull, and said discussions at the meeting would include tensions on the Korean Peninsula and trade.

In brief remarks prior to news media being ushered out of the meeting, Turnbull said North Korea’s “recklessness” needed to be stopped, while Abe said the most immediate challenge was to ensure regional peace and stability.

Following the meeting, the White House said “the three leaders reaffirmed their commitment to maintaining maximum pressure on North Korea in the effort to denuclearize the Korean Peninsula.”

“They also discussed expanded security cooperation for enhanced deterrence and defense against North Korean aggression,” the White House said in a statement.

The three men also discussed the need for “free and open” trade in the Indo-Pacific region and “the need to pursue fair and reciprocal trade,” the White House added.

Trump, who campaigned heavily on U.S. trade issues, made pulling out of the Trans-Pacific Partnership (TPP) Asian trade deal one of his first acts in office. His administration has instead pledged to reach bilateral pacts with individual nations.

Countries remaining in the pact have said the deal is advancing without the United States.

 

(Reporting by Steve Holland; Writing by Martin Petty and Susan HeaveyEditing by Raju Gopalakrishnan and Jonathan Oatis)

 

Trump heads to Japan with North Korea on his mind

U.S. President Donald Trump shouts to reporters as he and and first lady Melania Trump board Air Force One for travel to Hawaii, on his way to an extended trip to five countries in Asia, from Joint Base Andrews, Maryland, U.S. November 3, 2017.

By Steve Holland

HONOLULU (Reuters) – U.S. President Donald Trump heads to Japan on the first stop of his five-nation tour of Asia on Saturday, looking to present a united front with the Japanese against North Korea as tensions run high over Pyongyang’s nuclear and missile tests.

Trump, who is on a 12-day trip, is to speak to U.S. and Japanese forces at Yokota air base shortly after arriving in Japan on Sunday and looked to stress the importance of the alliance to regional security.

Ballistic missile tests by North Korea and its sixth and largest nuclear test, in defiance of U.N. Security Council resolutions, have exacerbated the most critical international challenge of Trump’s presidency.

Aerial drills conducted over South Korea by two U.S. strategic bombers have raised tensions in recent days.

In a display of golf diplomacy, Trump is to play a round of golf with Japanese Prime Minister Shinzo Abe. The two leaders also played together in Florida earlier this year.

Trump will also have a state call with the Imperial Family at Akasaka Palace during his visit. Abe and Trump will meet families of Japanese citizens abducted by North Korea.

Joined by his wife Melania on part of the trip, Trump’s tour of Asia is the longest by an American president since George H.W. Bush in 1992. Besides Japan, he will visit South Korea, China, Vietnam and the Philippines.

Trump extended the trip by a day on Friday when he agreed to participate in a summit of East Asian nations in Manila.

His trip got off to a colorful start in Hawaii. He was taken by boat out to the USS Arizona Memorial, where lies the World War Two ship that was sunk by the Japanese during the Pearl Harbor attack in 1941.

The Trumps tossed white flower petals into the waters at the memorial in honor of those who died at Pearl Harbor.

 

TRADE, NORTH KOREA

Trump’s trip is to be dominated by trade and how to muster more international pressure on North Korea to give up nuclear weapons.

“We’ll be talking about trade,” Trump told reporters at the White House on Friday. “We’ll be talking about obviously North Korea. We’ll be enlisting the help of a lot of people and countries and we’ll see what happens. But I think we’re going to have a very successful trip. There is a lot of good will.”

Trump has rattled some allies with his vow to “totally destroy” North Korea if it threatens the United States and his dismissal of North Korean leader Kim Jong Un as a “rocket man” on a suicide mission.

White House national security adviser H.R. McMaster, briefing reporters on Friday, defended Trump’s colorful language.

“What’s inflammatory is the North Korean regime and what they’re doing to threaten the world,” McMaster said.

Trump will seek a united front with the leaders of Japan and South Korea against North Korea before visiting Beijing to make the case to Chinese President Xi Jinping that he should do more to rein in Pyongyang.

Trade will factor heavily during Trump’s trip as he tries to persuade Asian allies to agree to trade policies more favorable to the United States.

A centerpiece of the trip will be a visit to the Asia Pacific Economic Cooperation summit in Danang, Vietnam, where he will deliver a speech in support of a free and open Indo-Pacific region, which is seen as offering a bulwark in response to expansionist Chinese policies.

 

(Reporting By Steve Holland; Editing by Paul Tait)

 

Rookies and robots brace for first UK rate rise since 2007

Office lights are on at dusk in the Canary Wharf financial district, London, Britain,

By Fanny Potkin and Polina Ivanova

LONDON (Reuters) – Financial markets braced this week for what could be the Bank of England’s first rate rise in a decade – a step into the unknown for a generation of young traders who started work after 2007 but also for the state-of-the-art technology they use.

After a decade that included a global financial crash, numerous investigations into market collusion and relentless automation, trading floors at banks in London have been transformed in ways not obvious at first glance.

The newest kid on the block is not necessarily the rookie trader with a PhD in physics but the latest computer model or algorithm. How these models will perform under the almost novel circumstances of tightening monetary policy is as much a question as how the human neophytes will react.

Using past market data, assessments of demand, valuation models and even measures of how upbeat news headlines are, computers crunch the numbers, game the scenarios and buy or sell in the blink of an eye.

But shocks such as Brexit have shown that computer-driven trading can end in stampedes, or so-called flash crashes.

“You’ve got to weigh up the strength of the traders and the strength of the algorithms that have been developed and whether they can manage this kind of a process when the rate hike does come in,” said Benjamin Quinlan, CEO of financial services strategy consultancy Quinlan & Associates.

At Citibank’s expansive trading floor in London, the dealing room doesn’t look much different from a decade ago with traders hunched in front of banks of screens, the odd national flag perched on top, and television screens on mute.

But beneath the outward appearance, foreign exchange trading has undergone a seismic shift: more than 90 percent of cash transactions and a growing proportion of derivatives trades in the global $5 trillion a day FX market are done electronically.

So-called smart algos, or fully automated algorithmic trading programs that react to market movements with no human involvement, were virtually non-existent in 2007. Now, almost a third of foreign exchange trades are driven solely by algorithms, according to research firm Aite Group.

“Most of these algorithms haven’t really been tested in a rising interest rate scenario so the next few months will be crucial,” said a portfolio manager at a hedge fund in London.

To be sure, the U.S. Federal Reserve’s first rate rise in a decade in 2015 provided a dry run for this week’s UK decision – but the two economies are in very different positions and the knock-on effects on the wider financial markets of a Bank of England move are hard to predict.

 

ROOKIES AND ROBOTS

Much has changed since the Bank of England raised rates by 0.25 percent on July 5, 2007 to 5.75 percent. The first iPhone had yet to reach British shores, the country’s TVs ran on analogue signals and Northern Rock bank was alive and well.

Where once lightning decision-making and a calm head in a crisis were at a premium, the bulk of trading today is done by machines and the job of a foreign exchange sales trader is often little more than minding software and fielding client queries.

Itay Tuchman, head of global FX trading at Citi and a 20-year market veteran, said while the bank employs roughly the same number of people in currency trading as over the last few years, fewer are dedicated to business over the phone.

“We have an extensive electronic trading business, powered by our algorithmic market making platform, which is staffed by many people that have maths and science PhDs from various backgrounds,” said Tuchman, who heads trading for Citi’s global developed and emerging currency businesses.

London is the epicenter of those changes with the average daily turnover of foreign exchange trades executed directly over the phone down by a fifth to $566 billion in just three years to 2016, according to the Bank of England.

At Dutch bank ING’s London trading room, Obbe Kok, head of UK financial markets, said the floor now has about 165 people but the bank wants to make it 210 by the end of the year – searching mainly for traders attuned to technological innovations and keen on artificial intelligence.

The proportion of people employed in trading with degrees in mathematics and statistics has increased by a 58 percent over the last 10 years, Emolument, a salary benchmarking site, said.

“What banks have started to do is trade experience for technological skill and with electronic platforms growing, the average age on the floor is a bit younger,” said Adrian Ezra, CEO of financial services recruitment agency Execuzen.

 

TAPER TANTRUM

The increasing use of technology means traders can gauge the depth of market liquidity at the click of a button or quickly price an option based on volatility – a major change from a few years ago when they had to scour the market discreetly for fear of disclosing their interest to rivals.

Ala’A Saeed, global head of institutional electronic sales and one of the brains behind Citi’s trading platform FX Velocity, said its electronic programs process thousands of trades per minute.

Most of the currency trading models used by banks incorporate variables such as trading ranges, valuation metrics including trade-weighted indexes and trends in demand based on internal client orders to get a sense of which way markets are moving – and the potential impact of a new trade.

Nowadays, the models also incorporate sentiment analysis around news headlines and economic data surprises.

These electronic trading platforms also have years of financial data plugged into them with various kinds of scenario analyses, but one thing they have sometimes appeared unprepared for is a sudden change in policy direction.

Witness the market mayhem exacerbated by trend-following algorithms when Switzerland’s central bank scrapped its currency peg in 2015, or the taper tantrum in 2013 when the U.S. Federal Reserve said it would stop buying bonds.

Or Britain’s vote last year to leave the European Union.

Indeed, the biggest risk for financial markets cited by money managers in a Bank of America Merrill Lynch poll in October was a policy misstep from a major central bank.

 

EASY CREDIT, LOW VOLATILITY

One concern is that the rise in automation has coincided with a prolonged decline in market volatility as central banks from the United States to Japan have kept interest rates close to zero and spent trillions of dollars dragging long-term borrowing costs lower to try to reboot depressed economies.

While central banks have been careful to get their messages across as they end the years of stimulus, there are concerns about whether quantitative trading models can capture all the qualitative policy shifts.

For example, a growing number of investors expect the Bank of England to raise its benchmark interest rate to 0.5 percent on Nov. 2, and then leave it at that for the foreseeable future.

But futures markets are expecting another rate rise within six to nine months, injecting a new level of risk around interest rate moves and potentially boosting volatility.

Neale Jackson, a portfolio manager at 36 South Capital Advisors, a $750 million volatility hedge fund in London, said young traders have never seen an environment other than central banks supporting markets, and that has fueled risk-taking underpinned by the belief that “big brother has got our backs”.

“The problem these days is that there’s a whole generation of traders who have never seen interest rates, let alone interest rates hikes,” said Kevin Rodgers, a veteran FX trader and the author of “Why Aren’t They Shouting?”, a book about the computer revolution within financial markets.

 

(Additional reporting by Maiya Keidan and Simon Jessop; writing by Saikat Chatterjee; editing by Mike Dolan and David Clarke)