It's been an explosive week for growth across the Pacific in Japan. The Nikkei (NIKKEIINDICES:^NI225) leaped almost 5% this week, and more than 2.6% on Friday alone, boosted by positive news out of the economy. Although concerns continue to rage on about Japan's devaluation of the yen -- with Asian rival China now stepping in to engage its island neighbor -- the results so far defend the Japanese government's moves. Stocks are on the rise across the Pacific, and investors need to keep an eye on this surging market.
Inflation to the rescue
Shinzo Abe's inflationary plans are working so far, according to data released today. The third-largest economy in the world grew by an annualized 0.2% in the fourth quarter, easily topping projections of a 0.4% GDP contraction. All signs are pointing up: Consumer spending and public investment both pushed higher in the quarter, while capital spending declined by less than expected. The yen has now fallen more than 20% against the dollar since October, fueling the Nikkei's recent surge.
Not everyone's happy about Japan's growth, however. China cautioned Japan on its aggressive inflationary targets, fearing Japan's rise will hurt its own growth goals. China's Commerce Minister pleaded for leading economies to stop devaluing currencies on Friday, part of the fears of a "currency war," as nations attempt to boost exports. Abe has so far ignored such calls for restraint and, given China's ongoing territorial dispute with Japan over the Senkaku Islands, it's doubtful the Chinese warning will even cross the new Japanese prime minister's mind.
A weak yen is great for leading exporters in Japan, regardless of what other nations think. Shares of Toyota (NYSE:TM) have risen alongside the Nikkei this week, gaining 1.8%; fellow Japanese automaker Honda (NYSE:HMC) saw even more pronounced gains, picking up more than 3.7% this week alone. With these automakers dependent on foreign sales to fuel much of their revenue, a weaker yen goes a long way for their bottom lines.
Toyota certainly hasn't been sitting still lately, opting to shake up its management team Wednesday as it looks to expand its regional businesses. Toyota's looking to combat sales pushes from challengers such as General Motors (NYSE:GM) and Hyundai across the globe. GM, in particular, has expanded internationally with an aggressive zeal, growing Chinese sales in 2012 by 11.3%. Japan's spat with China won't help Toyota battle GM in the second-largest economy, but Japan's top automaker is looking to expand its presence in the lucrative U.S. market, among others. Toyota retook the top worldwide spot in the industry from GM in 2012, and it's looking to maintain its grip on the throne.
Not every Japanese stock is on the upswing lately, however. Despite year-to-date gains, Panasonic (NASDAQOTH:PCRFY) has slumped by 8.5% over the past month. The electronics maker lost more than 1.3 trillion yen -- or $13.8 billion -- in the past two years, and its turnaround strategy hasn't quite taken root yet. Panasonic is cutting jobs and slashing business divisions, but, with rivals such as Samsung and even Apple (NASDAQ: AAPL) still light years ahead of it in the electronics market, it's difficult to imagine Panasonic returning as a force in the industry any time soon.
Battling for the top spot