The yen has weakened rapidly, driven by rising U.S. interest rates and shows no signs of halting.
Japanese equities have traditionally rallied when the yen has weakened against the dollar, but the relationship has not been so conspicuous this time. Similarly, the correlation between a weaker yen and higher stock prices appears to be fading in the long term.
Trading positions of overseas investors, who typically have strong influence on the performance of Japanese stock markets, has remained relatively light over the past few years. Policy uncertainty surrounding the Kishida administration needs to be cleared before overseas investors begin to buying Japanese equities.
Read the full report here:
Written by Hitoshi Asaoka, Senior Strategist Asset Management One Co., Ltd.