Japanese currency and stock market—What happened during the COVID-19 pandemic?

This paper examines the relationship between the Japanese Yen and the country’s stock returns. Using several variants of econometric models and empirical specifications, we unravel that the depreciation of the Yen vis-à-vis the US dollar led to gains in Japanese stock returns. A one standard deviation depreciation of the Yen during the COVID-19 period (equivalent to 0.588%) improved stock market returns by 71% of average returns We see that this relationship was stronger over the COVID-19 period (January 2020 to August 2020) compared to the pre-crisis period.