Japan’s stock market is booming. It isn’t all about the weak yen.

livemint.com:

Is a weak currency good for Japan’s stock market? It is complicated. A lower yen is traditionally seen as positive for Japanese stocks as it should make its exports more competitive. And this is certainly still true to some extent.

More than half of the companies in the Topix index are exporters, according to Bank of America. The broker estimated that every additional yen to the dollar in the exchange rate might boost operating profit for companies in the Topix 500, which tracks the largest Japanese companies, by 0.5%. Indeed, Toyota and Honda this week reported record profits for the fiscal year through March, partly helped by the cheaper yen.

But the currency’s recent sharp depreciation hasn’t appeared to boost stock. The Topix index has fallen 1.5% since the end of March even as the yen has cratered. The yen touched 160 to the dollar at one point in April before a suspected intervention by the Japanese government brought it back.

It is now trading at 156 against the dollar, nearly 10% weaker than at the beginning of the year. A further rapid depreciation of yen—it lost 4% against the dollar just in April—would pose two risks to the market. First, it could raise the costs of imports such as food and energy, in turn hurting growth in real wages and consumer spending.

J.P. Morgan calculated that a yen depreciation would be positive for the stock market until a level of 157 yen to the dollar, the break-even point when expected pay rises would be canceled out by inflation. In March, Japan’s real wages fell 2.5% from a year earlier, but the results of this year’s annual salary negotiations gave hope that they could rise later this year.