Global stock investors have continued to purchase Japanese shares despite the relatively lackluster economic statistics coming out of the world's third largest economy. We can speculate on the reasons foreigners might be fancying Japanese shares: perhaps global stock investors are viewing Europe as a source of capital and Japan as a destination of capital, perhaps the they are discounting the BOJ upping the ante on asset purchases, or maybe some Japanese shares have become cheap enough to entice the value investor clientele. Either way, it is clear that Japanese stocks have grabbed someone's attention, which if history is a guide is both good for the Nikkei and bad for the yen.
The first chart below shows the twelve week moving sum of foreign purchases of Japanese stocks. The second chart overlays that series on the Nikkei and the third chart overlays the same series on the yen. From these charts we can surmise that any acceleration of foreign buying of Japanese stocks will have a positive effect on the Nikkei at the expense of the yen.