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Kelly Evans: Apple warns, Japan weakens

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CNBC's Kelly Evans
CNBC

Well that certainly caught everybody's attention.

Not Apple's revenue warning; I mean Japan's horrendous GDP number Monday night.

Japan's economy shrank at more than a 6% annualized pace at year-end. Yowza.

It's not like the WSJ's Mike Bird has been warning that exactly this was going to happen when the country pressed ahead with its sales-tax hike. Here's him reacting yesterday: "Japan's government keeps hiking its sales tax, crashing household consumption and stalling minor economic expansions. It needs to stop, and the international organisations advising it to keep doing it need to stop too.

And this was before the coronavirus, the culprit behind Apple's warning, hit. The Japanese economy has been the subject of endless economic analysis and study over the past thirty years, ever since its stock market's breathtaking collapse ushered in a persistent deflation. The past decade has brought one government stimulus effort after another after another to combat that. Remember when the Bank of Japan bought up all the 10-year debt (err, sorry, 44% of it) and became something like 70% owners of Uniqlo? Yep. But the sales tax just had to be raised because of Japan's high government debt. The IMF last week, before the dismal GDP print, was calling for an even higher sales tax hike!

I might suggest there are lessons here for America, too, as the presidential candidates float one tax hike proposal after another, but let's not get too political about it*. The point for Japan is that its best ability to service its debt over time will come from a growing economy, and thus the sales-tax hike meant to help improve its finances has actually just worsened them considerably.

As for Apple, the bears are angry the stock isn't down more after its second revenue warning in just over a year. But look: after Apple's warning early last year that Chinese demand was not as strong as hoped, the stock sank 10% that day but has since more than doubled. Doubled!!! It was in the mid-$150s last January; today it's at $325. I'll be musing over the "why"s of this with Ina Fried and Steve Kovach at the top of the show today.

For now, unless coronavirus is going to be an annual event that permanently destroys the company's supply-chain and Chinese demand, the stock isn't likely to trade off much on it.

See you at 1 p.m!

Kelly

*We will deconstruct Bloomberg's new tax plan "to rein in Wall Street" around 1:40 p.m. today. How about just shutting down the terminals? That would do it!

Twitter: @KellyCNBC

Instagram: @realkellyevans