The correlation between the Japanese yen and the TOPIX has turned positive for the first time since 2005, marking a significant structural shift in Japan’s market dynamics.

Historically, the yen and Japanese equities often moved in opposite directions:

• a weaker yen supported exporters and lifted equities
• a stronger yen typically pressured stock performance

A positive correlation suggests a new regime, potentially driven by:

• changing Bank of Japan policy expectations
• shifting capital flows
• structural adjustments in Japan’s equity market composition

For traders, this development alters traditional macro playbooks. FX–equity relationships that held for decades may no longer apply, increasing the importance of monitoring cross-asset correlations in real time.

When long-standing correlations break, markets often enter a transition phase — and those periods tend to create opportunity as well as volatility.