NEW YORK (The Street) -- Japanese stocks have been a source of grief for investors in 2014 after stellar performance last year, seeming to confirm pessimistic forecasts that structural reform would fail.

Now market sentiment faces another hurdle: a hike in Japanese consumption tax from 5% to 8% on Tuesday, aimed at helping reduce national debt that stands at almost 245% of GDP.

Last time Japan lifted its sales tax in 1997 the economy fell into recession shortly afterwards, albeit against the backdrop of the Asian financial crisis.

Fast-forward nearly two decades and Japan's economy is still struggling, growing at less than half the expected pace in the fourth quarter.

While Abenomics - a package of monetary easing, structural reform and fiscal stimulus - fuelled a 52.6% jump in the Nikkei last year, lasting structural change appears elusive.

Concerns around the sustainability of reform and Japan's debt pile, along with a strengthening yen have seen the Nikkei slump 7.6% so far this year.

But Wilmington Trust investment strategist Clem Miller voices the sentiment of many fund managers. "The tax has been anticipated and built into the market price so it's likely to have a marginal impact when it comes into place," he said.

Contrast this to the unexpected Ukraine situation, which has shaken markets in large part due its unknown ramifications.

Other fund managers note the consumption tax may be easily offset by further stimulus from the Bank of Japan, which is keen to ensure the economic recovery is not derailed.

In addition many Japanese companies have robust balance sheets with net cash - a contrast to the late 1990s - making another recession unlikely.

If market sentiment is shaken by this tax, more stimulus would be a positive for Japanese stocks, despite failing to address underlying structural issues.

For example, Miller and others note that a depreciating yen - which fell 17% last year - has done little to boost the fortunes of Japanese exporters, many of which already have operations outside Japan.

Like many developed nations, Japan also has an ageing population. But a far lower level of workforce participation by women compared to Western nations is adding to its national debt woes, with required cultural change expected to take at least a generation despite any economic incentives Abe may introduce.

The takeaway: Japan's consumption tax is unlikely to trigger a further nosedive in shares. But don't bet on a fast recovery for the Nikkei unless the Bank of Japan re-juices its stimulus pump.

-- By Jane Searle in New York