There are other theories:
1) South Korea's scientific survey ship has arrived at Dokdo around the same time, conducting its 'survey'. News has been submerged with the missile "crisis". This explains why 7 useless out-dated Scuds were fired endlessly, and that the real focus, Taepodong-2, was a total fisaco. Perhaps that was intentional.
This may be a successful collaboration of the Korea's about Dokdo. But definitely not a good move for NK in the long term. It provided Japan with the excuse it needed to re-arm, and it was a major slap on China's face, especially after China openly appealed for NK not to do that.
2) The most plausible theory is that these missiles are for "internal consumption", i.e. This can be read as a sign that Kim Jong-il's power is in jeopardy. In order to tighten his control, KJI needs foreign pressure so that within DPRK his team would stick together. The best way to attract foreign pressure is to provoke responses. (See Guo Jia's advice to Cao Cao)
3) (Update Jul 7) NK Zone listed a few theories, including the 'conventional wisdoms' discussed above. But there is a much simpler explanation. Maybe NK has already invested so much resources into it, and it really want to see its toys work? (the timing is controlled by the fact that the fuel for this TPD-2 cannot be stored and has to fired within a month after preparation). This explains why it has gone ahead no matter what, but did not fully explain the other 5-6 smaller missiles.
4) (Update Jul 11) The Economist has a very plausible explanation. It believes that the launch was used to prove to other countires, potential buyers of the missile (ie Iran), that the technology works
N Korea does have its right to test the outdated gadgets (Scud, Rodong). It also has the right to develop its own Taepodong. It should, however, at least warn the fishermen in the area. Anyway, the damage, to NK itself, far outweighs any benefit it could justify, even if you count the distraction on Japan. Expect China abstaining, or even supporting all the UNSC motions propopsed by the US.
1) Financial advice: buy time for the financial market, as there is absolutely no reason to sell for such insignificant naughtiness.
2) Compare Japan's hysteria with more rational reaction from Russia and China
Vitali Churkin, Russia’s UN envoy, suggested that his Government, while particularly concerned by information that some missile fragments may have fallen near Russian territory, did not envisage any punitive measures. “The goal should be the resumption of the six-party talks and the ultimate diplomatic solution.”
Wang Guangya, the Chinese ambassador, cited the precedent of the Security Council’s response to North Korea’s 1998 test-firing of a Taepodong 1 missile that flew over Japan. Then the council issued a statement expressing “regret” over the missile launch, which “poses harm to the fishing and shipping activities in the region”.