Nothing's slowed Japan's markets and the Nikkei (NIKKEIINDICES:^NI225) stock index this year. The Nikkei's not done, either, pulling in another 1.4% in gains over the past week to add to its already substantial year-to-date climb of more than 43%.
The Nikkei's gains have come behind Japan's miraculous economic bounce-back in 2013, but in order for Japanese stocks to continue their run, the country's economy will have to keep producing going forward. Japan got some good news this past week, but can the world's third-largest economy continue its run? Let's check out the latest from across the Pacific.
Stimulus keeps churning
The Japanese economy slowed down in the third quarter from its torrid pace to start the year, but that doesn't mean it's disappointing investors and economists. Japan's exports surged to a three-year high in October, led by strong auto shipments that helped export growth climb to 18.6%. That mark easily crushed expectations and lends optimism to investors hopeful that Japan's leading global companies such as Panasonic (NASDAQOTH:PCRFY) and Sony (NYSE:SNE) can take advantage of the weakening yen through international sales.
However, trade data wasn't all good for October -- or even much good at all for Japan's broader economic outlook. Imports in power and energy have spiked since the Fukushima nuclear disaster, and spiking exports pushed Japan's trade balance to its 16th straight month of a deficit in October. That won't do anything to alleviate Japan's swelling public debt, the highest such mark in the world that's threatening the country's future economic stability. Public debt's already hindered Europe's comeback from the recession, and if Japanese Prime Minister Shinzo Abe's stimulus and easing plan doesn't work to perfection, debt could come back to haunt Japan -- and Japanese market investors -- as well.
The Bank of Japan concluded its most recent meeting without any substantive changes to its stimulus plan, meaning we're likely to see more of the same in 2014. It's not likely to create as drastic a jump in the Nikkei and other Japanese stocks as it has in 2013, considering that Japan's economic leap surprised many at the start of the year. However, Japan's stocks still look strong going forward, particularly those engaged in the international markets that could thrive if the yen continues to weaken against the dollar, euro, and other major currencies.
Sony's one company that's thrived this year behind the Nikkei's rise. Sony's stock has leaped by 59% year to date despite a rough past week, but this company's not satisfied sitting on its gains. The company's media division -- specifically its movie production business -- has long been a target of spinoff rumors, but while Sony's keeping its movie branch, it's looking to implement $250 million worth of cuts to the business.
The company's targeting growth opportunities in TV and other areas. Additionally, Sony's recent release of its PlayStation 4 entertainment console -- a device that sold 1 million units in its first 24 hours after launch -- have the company poised on success in this industry. Sony still projects more than $600 million of operating profit at its television and movie business next year, but the company's shift toward TV and gaming -- entertainment areas that have thrived as movies have become dominated by skyrocketing budgets as of late -- indicates smart forward-thinking on Sony's behalf and a good sign for investors.
Electronics rival Panasonic hasn't been as successful this year from a financial perspective, as many of its old product hubs have been eaten away by consumer shifts. To compensate, Panasonic's looking to reduce its digital camera launches next year to five from this year's 10. Cameras make up an increasingly obsolete industry as smartphones and mobile have taken over this niche, and Panasonic sees more losses from its camera business next year. This company's struggles don't look to end soon, and investors should tread cautiously around this stock going into 2014.
Fool contributor Dan Carroll has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Amazon.com, Apple, Facebook, and Google. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.