The long-held precept that a weak yen is a good thing for Japanese stocks may finally be put to rest, as the breakdown in their correlation accelerates amid divergence in global monetary policy.
Since its big summer crash, the Topix has been stuck in a narrow trading band even as the yen has swung between a 14-month high of ¥139.58 per dollar in mid-September and a mid-November low of ¥156.75, which was not far from its 38-year trough in July.
The Topix and the yen have been largely moving independently over the past two months, with the coefficient of determination — a measure of linkage between two separate data — between the two assets at almost zero. That’s far below the 0.50 mark that is often considered indicating some kind of relationship.
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