Nikkei’s Impact On Japanese Investment

The Nikkei’s Impact On Japanese Investment In Foreign Securities

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• Japanese retail investors’ growing risk appetites on the back of rising Nikkei leads to increased foreign securities investments; this is one of the factors causing the negative correlation between the Nikkei and JPY.

• Indeed, there has been a positive correlation between the level of Nikkei and Japanese retail investors’ foreign stock investment. Historically, a rise in the Nikkei above 12,000 prompts an increase in Japanese retail investors’ foreign stock investment, with the pace of investment accelerating as the Nikkei rises further.

• For Japanese investors’ investment behavior, an absolute level of the Nikkei is the most important determinant. On the other hand, rates of change in the Nikkei and the relative performance of Japanese and foreign stocks have little impact.

• Relations between the Nikkei and foreign bond investment by Japanese lifers could not be identified from the data.

ENDS

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