Hope from Japan

Better news from the Japan crisis today, as the nuclear power company Tepco appears to be on track to complete a power line to the Fukushima nuclear power plant this afternoon Tokyo time.

If they can start running water into plants No. 3 and No. 4, to replenish the spent nuclear fuel pools, then potentially the apocalyptic fright of massive radiation could be off the table.

No one knows, certainly not I. So much of this story is unknowable. But at least there’s hopefully some good news.

The human toll in Japan is already massive. That’s a tragedy. But if somehow the meltdown story leading to massive radiation can be stopped, that would be a sign of hope for the Japanese people and all the rest of us.

One of the many fear gauges for this story is the U.S. and world stock markets, including Japan’s. While the Nikkei fell 1.4 percent Wednesday, the Dow managed a 1.4 percent gain today, up 161 points. It could be nothing more than a relief rally.

Traders are pointing to a strong factory report from the Philly Fed and a solid manufacturing gain for the index of industrial production. You want to say that the U.S. economy will survive the Japanese crisis, and undoubtedly that view is correct. But no one can rule out a worst-case Japanese story. Not yet, anyway.

And should that worst case ever occur — and let us pray it does not — no economy, including ours, will be spared.

But let me be hopeful on the Japan nuclear crisis somehow being solved. If that happens, the U.S. economic outlook is still 3 percent, or reasonably good.

All the economic stuff is still a sidebar to the Japanese tragedy. So perhaps as a sidebar to the sidebar, inflation pressures in the U.S. continue to rise. Today, for example, the consumer price index showed another big gain, the third straight monthly rise. This comes to 5.6 percent at an annual rate over the past three months. Producer prices paid by businesses have jumped 13.8 percent annually over the past three months. And import prices paid by everybody are up 6.9 percent over the past year.

Mr. Bernanke still thinks it’s all temporary — just a minor bulge in food and energy. But inflation expectations in the bond market and in consumer surveys show increases, not declines. Gasoline is holding at $3.55 at the pump. A year ago, it was $2.79. I hope the Fed is paying attention.