USD/JPY → Japan stocks

Common explanation (Cause · yen strengthens, Japan stocks fall): A stronger yen squeezes exporters’ profits in yen terms.

This issue: USD/JPY at 94 (hot), Japan stocks at 89 (hot) — both above normal, in line with the common explanation.

Hot and cold describe position, not good or bad: warm does not mean a fall is coming, and an extreme reading does not mean a quick reversal. We describe history only, with no buy or sell advice.

Where it stands now

Where the two indicators stand this issue

USD/JPY: 24.3% above its 10-year average. Japan stocks: 90.2% above its 10-year average.

Tests

Does this link hold up?

Common explanationA stronger yen squeezes exporters’ profits in yen termsSource: Federal Reserve Bank of New York, “Yen and Yang: The Response of the Nikkei to the Yen” (2013).
Tested against our dataAgreement between the positions of USD/JPY and Japan stocks (2-month lag), measured in the direction of the common explanation: +0.59. Looking at every 5-year period (shifted one year at a time), the two moved in that direction in 19 of 31. Weak or inconsistent
Periods when it did not holdAcross 31 5-year periods, out of step in 1990⁠–⁠2007 and 2017⁠–⁠2023.

History

The two lines, overlaid

Data: Federal Reserve H.10, via FRED (Federal Reserve Bank of St. Louis); OECD Main Economic Indicators (share prices). Positions: our calculation.

USD/JPYJapan stocks

Limits

What this card cannot tell you

Moving together does not prove that one causes the other.
Links change over time; periods when this one did not hold are listed in full.
This is the historical record, not a forecast.

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