This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Cramer's Action Alerts PLUS - See his portfolio and get alerts BEFORE every trade. Learn more NOW!

Japan economy holds steady as tax hike looms

By ELAINE KURTENBACH

TOKYO (AP) a¿¿ Japan's recovery is holding steady ahead of a looming sales tax hike, economic indicators showed Friday, though weakness in wages and spending suggest it remains vulnerable to a reversal.

The consumer price index rose 1.3 percent in January and factory production also climbed.

Past experience suggests Japan will see a big plunge in demand after the 3 percentage point tax hike to 8 percent on April 1, said economist Masamichi Adachi of JP Morgan in Tokyo.

"It is a very difficult time to gauge the underlying strength of the economy," he said.

As manufacturers and retailers raise prices to compensate for higher costs they are passing them on to consumers, who already appear to be tightening their belts to compensate.

Japanese awoke Friday to front-page reports of plans for hikes in the prices paid for vending machine soft drinks and plans for further increases in gas and electricity rates.

Contrary to earlier expectations, manufacturers are forecasting that factory output will fall in March, following a 4 percent increase in January to about the level it was at before a massive earthquake and tsunami hit northeastern Japan in March 2011, the Ministry of Economy, Trade and Industry reported.

Japan's financial industry and banks are relatively sound, compared with the 1990s. Its companies have much less debt and there is no reason to expect a major regional crisis similar to the one that slammed the economy in 1997, plunging the economy into recession. By coincidence, that period of economic trauma followed a tax hike in Japan.

The government and central bank have unleashed a flood of monetary and fiscal stimulus aimed at breaking Japan free from a long spell of deflation, or falling prices, that is thought to discourage investment and spending.

But the central bank needs to ensure financial markets remain stable and Prime Minister Shinzo Abe needs to deliver on promises for reforms to help make the economy more competitive, Adachi said.

1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG

Markets

DOW 18,065.78 -137.59 -0.76%
S&P 500 2,095.95 -11.83 -0.56%
NASDAQ 4,962.92 -16.9810 -0.34%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs