Regarding Deterrence and North Korea

I recently had a productive conversation with my illustrious colleague Dr. Fujiyama regarding the recent developments on the Korean Peninsula. The conversation eventually came to the question of a hypothetical North Korean nuclear strike against a major US ally- Japan. Japan is a likely target (aside from, obviously, South Korea),especially given that the NorKors decided to show off their new missile system by firing it over the Japanese Islands. The missile in question, the Taepo-dong 1, has been supplemented by a more advanced Taepo-dong 2. For more information, see this informative article at the BBC. In addition, fighting Japanese occupation during the Second World War figures largely in the national myth of Kim Il-Sung, father of current(?) leader Kim Jong-Il.
For those of you who are behind on your history, after the Second World War, Japan had to adopt a new constitution which forbade it from possessing offensive military capability. The US guaranteed Japan's safety by international treaty, and took over the offensive portions of Japan's Defence needs.
In short, this means that if Japan is attacked, it's up to the US to immediately retaliate. There are two options, and both of them are bad.
The first option is to comply with our treaty obligations and send some nukes North Korea's way. Obviously, such a strike would be limited in nature, concentrating on military installations and strategic targets. That being said, such targets are often near population centres, and fall-out would cause much injury for years to come.
Of course, there's always the problems that the incoming warheads could trigger alarms in Russia and China, who might think that a general war had broken out and decide that the US is attacking them. The ballistic trajectory of a US-based ICBM is hard to determine after the initial burn, which is the likely point of detection. Someone might decide it's not worth waiting for the targeting figures to come in, and an apocalyptic conflagration might result.
Alternatively, the US may decide to hold back on the nukes and go instead for a conventional war designed to topple the NorKor regime and reunite it with the South. This sounds like a lovely solution, as it does not add to the list of nuclear victims. Sadly, it has some very serious problems.
If the US does not act to defend Japan, or retaliate on its behalf, the US has betrayed its commitments to the Japanese. This means that the Japanese will seek to develop their own offensive capability, and will probably go nuclear as well. This means that there will be a direct nuclear confrontation over the Sea of Japan. In addition, any smidgen of the US-Japan alliance would be lost by this failure on the USA's part.
In addition, by not retaliating to nuclear aggression, the United States would effectively make its entire nuclear arsenal useless. Nuclear deterrence is based on the idea that fear of nuclear retaliation keeps people on the other side from "pushing the button." If the US demonstrated that it lacked the will or ability to retaliate to a nuclear strike, the cornerstone of deterrence is lost. This would lead to a massive destabilisation in the world order.
Even if this doesn't happen, occupations by the US do tend to be rather benign. Though human rights activists might disagree, the fact is that a western occupation and reconstruction would make North Korea far better than it is at present. The net effect is that the North Koreans would be,in effect, rewarded for using nuclear weapons.
To expand on the last point, and deter wild maniacs screaming about the Iraq occupation being an example of eeeeevil western imperialism and racism, and how no situation could possibly be worse, I direct them to this article which tells a few of the harrowing tales of survivors from the world's last Stalinist state. Other tales can easily be found using google.
All speculation aside, a nuclear strike by North Korea against any of its likely targets would have two effects even in the best-case scenarios. The first is that a lot of people will die. A nuclear strike is an unthinkable option in the minds of the civilised world. Use of a nuclear weapon will serve as a catalyst for more instability. When the unbelievable becomes believable, the old order can't stand and instability results.
Another problem that will result from an attack on an "Asian Tiger", especially one as densely populated and productive as South Korea or Japan, is economic. Given the losses of population and the devastation of economically critical urban centres, the impact on the world economy would be terrible. South Korea and Japan are responsible for a lot of high-technology production and also represent large markets. Given the interconnected nature of the global market, these problems would be felt world-wide. In addition to this, the sense of fear and panic instilled by the attacks would harm economic growth as well. The economic fallout could result in a world-wide depression.
There's an excellent geo-strategic discussion on this subject going on over at the always-informative Belmont Club.
Now it's off to Literature...