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What’s going on here?

The Nikkei 225 index reached its highest point since 1989, but Japan’s not Out Of The Woods yet.

What does this mean?

Warren Buffett is putting his faith – read: cash – into Japan’s economy, enticed by the defeat of decades-long deflation and the government’s plans to make investments more lucrative. So of course, investors the world over are following in the expert's footsteps. That newfound attention has pushed the Nikkei 225 index – which tracks Japan’s biggest companies – up to its highest point in three decades. The bigger, broader Topix index hasn’t been too shabby either, climbing over 10% this year.

Why should I care?

For markets: The Bank of Japan can’t win for losing.

Japan’s yen is headed toward its lowest point in 33 years. Just as a cheaper currency makes a vacation spot look more affordable, it makes a country’s stocks look like a better buy for international investors too. But while that’s a buoy for Japanese markets, it means anyone living in Japan gets less bang for their buck. And with shoppers watching their wallets, the country even dipped into a recession at the end of last year. That’s put the Bank of Japan in a pickle: the central bank could pull interest rates up to spur on the currency, but that move might encourage Japanese consumers to pull their purse strings even tighter.

The bigger picture: Oh Nikkei, you’re not so fine.

Don't pop the champagne yet, though. The Nikkei looks solid now, sure, but notching that 1989 peak only highlights how drab the country’s stock market was for the last three and a half decades. In fact, Japanese stocks have slipped over 80% since they briefly hit that high way back then. For comparison, the S&P 500 – which tracks the biggest companies in the US – is now worth 13 times more than it was in ‘89.

What’s going on here?

Nestlé sales dropped more than analysts expected, but the Swiss food company’s over-the-top pricing strategy more than made up for it.

What does this mean?

Major corporations are contending with higher costs just like the rest of us. They, though, have the enviable power to pass those costs onto customers through higher prices. But inflation-struck shoppers have their own cost-saving tactic: skimping on treats and swapping to cheaper alternatives. That meant Nestlé sold 2.4% less in Europe last year than the one before. Now sure, the company still made more from each sale after setting prices roughly 10% higher than the year before. But if those especially loyal customers start feeling the pinch or discover a new favorite yogurt brand, Nestlé will be left on the shelf (literally). That uncertainty might explain why the Swiss food firm’s stock is sitting at a four-year low.

Why should I care?

The bigger picture: So much for the greater good.

Nestlé and Danone raised their prices to even out higher costs – and yet, they’re making more profit. That has some critics wondering whether they’ve made their products more expensive than they had to. The tactic has been branded “greedflation”, which leaves plenty of budget-conscious shoppers struggling to fill a grocery cart. But as long as the wealthier few can afford to stock their pantries, companies won’t feel the need to consider those tags.

For markets: Breakfast is the most important investment of the day.

Europe’s “Granolas” group – GSK, Roche, ASML, Nestlé, Novartis, Novo Nordisk, L'Oréal, LVMH, AstraZeneca, SAP, and Sanofi – have done better as a whole than the Magnificent Seven over the last two years, while being half as volatile. In fact, they were behind 60% of Europe’s stock market uptick last year. They’re far from cheap as chips (or in this case, cereal), but the Granolas have proven their price points with solid profit, high margins, and healthy balance sheets.