Markets

Nikkei Nicks 18,000, But Don't Expect Magic From the TPP

Image: U.S. Trade Representative.

Monday got off to a good start on the other side of the Pacific, as the Japanese stock market opened the week with a solid gain to follow up on its rise late last week. The Nikkei 225 climbed 280 points to finish above the 18,000 mark as it tried to put a terrible third quarter behind it, and many market commentators pointed to apparent progress in negotiations over the Trans-Pacific Partnership as driving gains. Yet as much attention as the TPP has gotten lately, the trade pact by itself won't end Japan's long-standing economic struggles.

Why investors are excited about the TPP

The bullish argument favoring a free-trade area around the Pacific Rim is fairly simple: opening markets could spur greater economic activity that in turn could help pull Japan's economy back to a healthier trajectory. One interesting thing about the TPP is that despite the importance of trade between Japan and the U.S., the two countries haven't successfully negotiated an overarching trade pact of their own. As a result, the inclusion of Japan in the agreement is a key element that makes the deal more valuable for the U.S. and the pact's other members, which include Canada and Mexico in North America, Peru and Chile in South America, and key Asian nations like Malaysia, Australia, Singapore, New Zealand, and Vietnam.

Yet there are a number of things that the TPP wouldn't immediately do. Perhaps the most important is that China isn't a party to the negotiations, and so markets throughout Asia would still have to deal with the impact that China has had in numerous areas. Even given its recent slowdown, China still has an impressively high growth rate compared to more mature economies like Japan, and getting the Chinese into the TPP or a similar trade pact in the long run could make a much larger difference both for Japanese stocks and for their U.S. counterparts.

In addition, the TPP has raised political tensions from a number of corners. On one hand, the North American Free Trade Agreement has given Canada and Mexico a substantial advantage in trade with the U.S., and extending favorable treatment to Japan could threaten Canada's and Mexico's interests. At the same time, some of the pro-business provisions of the pact have raised the ire of governments that would see their ability to regulate and police foreign corporations operating within their borders.

Putting on a good show

At this point, though, Japanese Prime Minister Shinzo Abe will take any economic victory that he can get. With economists expecting Japan to fall into recession again once third-quarter GDP numbers are available, Abe's attempts to jump-start business activity have had only mixed success at best. Positive news could help bolster the Nikkei in the short run, but Abe and the Japanese government can only do so much, and eventually the companies that make up the Japanese stock market will need to pull their own weight to carry the Nikkei higher.

The $15,978 Social Security bonus most retirees completely overlook

If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known "Social Security secrets" could help ensure a boost in your retirement income. In fact, one MarketWatch reporter argues that if more Americans knew about this, the government would have to shell out an extra $10 billion annually. For example: one easy, 17-minute trick could pay you as much as $15,978 more... each year! Once you learn how to take advantage of all these loopholes, we think you could retire confidently with the peace of mind we're all after. Simply click here to discover how you can take advantage of these strategies.

The article Nikkei Nicks 18,000, But Don't Expect Magic From the TPP originally appeared on Fool.com.

Dan Caplinger has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days . We Fools may not 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 .

Copyright © 1995 - 2015 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Other Topics

Stocks

Latest Markets Videos

    The Motley Fool

    Founded in 1993 in Alexandria, VA., by brothers David and Tom Gardner, The Motley Fool is a multimedia financial-services company dedicated to building the world's greatest investment community. Reaching millions of people each month through its website, books, newspaper column, radio show, television appearances, and subscription newsletter services, The Motley Fool champions shareholder values and advocates tirelessly for the individual investor. The company's name was taken from Shakespeare, whose wise fools both instructed and amused, and could speak the truth to the king -- without getting their heads lopped off.

    Learn More