Yen’s Decline Boosts Japanese Stock Market, ‘Decoupling’ From China Proves Beneficial

Some analysts now believe that after more than three decades of structural adjustments, Japan’s economy is on the mend and poised for growth.

People walk past an electronic board showing a share price of the Nikkei index of the Tokyo Stock Exchange (L) and the rate of the Japanese yen versus the US dollar (R) along a street in Tokyo, on March 27, 2024. Kazuhiro Nogi/AFP via Getty Images

The Bank of Japan (BOJ) recently transitioned away from its negative interest rate policy, a notable departure from the expansive quantitative easing strategy that had been a cornerstone for the past 17 years. Despite expectations, the yen experienced a further decline rather than an appreciation following this policy shift. Concurrently, the Japanese stock market witnessed remarkable growth, with the Nikkei Index achieving new highs on two successive days, even briefly surpassing the 41,000-point mark.

The market is abuzz with speculation about the yen’s continued depreciation and the potential trajectory of Japan’s stock market amidst these developments. Some market analysts argue that in the face of global supply chain realignments and the Western world’s strategic positioning against the Chinese Communist Party (CCP), a fortified Japan plays a critical role. This perspective casts a favorable light on Japan’s economic outlook, with some predictions suggesting the Nikkei Index could usher in a milestone era of reaching 100,000 points.

Behind the Yen’s Persistent Weakness Post-BOJ Rate Increase

On March 19, the BOJ announced at its monetary policy meeting the conclusion of its broad easing measures initiated in 2016. This decision encompassed ending the negative interest rate policy by adjusting the rate from -0.1 percent to between 0 and 0.1 percent, continuing the purchase of long-term government bonds, and ceasing the addition of new exchange-traded funds (ETFs) purchases from exchanges. This move aligned with market anticipations.