Last week in Korea, the nightmares all seemed to be coming true. Washington appeared no closer to a resolution of the North Korean nuclear crisis than it was last March 12, when Pyongyang first announced its intention to withdraw from the Nuclear Nonproliferation Treaty. That has chilling implications for a future nucleararms race among Japan, China and the two Koreas, nations that already view each other warily at best. Now, even more than then, as one Tokyo-based diplomat put it late last week, “It’s getting harder to deny that maybe what the North wants at the end of this is The Bomb.”

Washington still thinks that race is avoidable. Ever since North Korea announced its intention to flout the outside world’s efforts to monitor its nuclear-development program, American diplomats have coolly insisted that they could “manage” the burgeoning crisis. Among other carrots, they have held out to the North the prospect of formal diplomatic recognition from Washington–long one of Pyongyang’s primary foreign-policy goals–in order to lure North Korea back into the nuclear fold. Far from trying to back Pyongyang into a corner, as one U.S. official put it last week, the United States has taken pains to ensure that Pyongyang officials won’t “lose face” even if they back down and allow inspectors from the International Atomic Energy Agency in to examine the country’s nuclear-development site. Still, Pyongyang ignored the IAEA’s Nov. 1 deadline to allow inspectors to perform routine maintenance on cameras and other equipment. Those cameras have already run out of film and batteries to keep them going; IAEA Director-General Hans Blix warned that the outside might have effectively lost that monitoring ability altogether.

America’s diplomacy has been cautious and adept, but as of last week it hadn’t gotten anywhere. North Korea is now six months closer to building a nuclear bomb than it was when the crisis first broke, and the rhetoric is heating up considerably. Diplomats in Tokyo and Seoul were alarmed by the statement attributed to a senior Pentagon official last week that “we are entering into a kind of danger zone.” They are convinced that talk of imminent conflict is both irresponsible and inaccurate and have called for cooler public statements. One senior Japanese diplomat said that nearly 70 percent of North Korea’s 1.1 million-man army had been stationed near the border with the South for at least three years. “It’s nothing new,” he said. Tokyo and Seoul insisted, in fact, that even talk of economic sanctions as a response to the North’s intransigence was premature. Both of North Korea’s closest neighbors remain fearful that a hostile Western gesture now could provoke the sort of irrational response that Washington has been trying to avoid.

But trying to determine what North Korea’s 81-year-old “Great Leader” Kim Il Sung and his son, 51-year-old “Dear Leader” Kim Jong Il, consider rational behavior remained as murky a task as ever. Former deputy assistant secretary of state for East Asian and Pacific affairs William Clark insisted last week that North Korea was “not irrational” and that the nuclear option may well be simply a bargaining chip for Pyongyang–its last, best hope for reducing its economic and diplomatic isolation.

To Tokyo, Korean nukes feel like more than a bargaining chip. Japanese officials were stunned this summer when the North successfully test-fired a new missile capable of hitting Osaka. It gave sudden credibility to hawks in the Defense Ministry who have long wanted Japan to have the option to go nuclear–and quickly–despite the presence of the U.S. nuclear umbrella. With a large and growing stockpile of plutonium that could easily be upgraded to weapons-grade material, Japan sent an unmistakable signal to the rest of the world at the Tokyo summit this summer, when it initially balked at signing an indefinite extension of the Nuclear Nonproliferation Treaty. Eventually Japan’s Prime Minister Morihiro Hosokawa said he supported the extension, but Tokyo’s original objection was the clearest evidence to date that its longstanding “nuclear allergy” may be fading, thanks in no small measure to North Korea. Only a settlement in the current crisis could head off a marked increase in nuclear tensions region-wide. Without it, the world’s most dangerous game will grow more dangerous still.