Analyzing the impact of macroeconomic variables on stock market: A Japanese Perspective

Stock markets are important indicators of any economy. The soundness of any economy is reflected by growth and development of its capital markets in general and stock markets in particular. Japanese stock exchange being the world's second largest stock exchange has grown by leaps and bounds after 2^nd world war. Japanese stock exchange is an important stock exchange of the world. This paper investigates the impact of some macroeconomic variables like consumer price index, foreign stock market index & yen/USD exchange rate on stock market efficiency of japan for the period April 2007 to March 2013. The study relies on ADF test, correlation analysis and descriptive statistics to validate and interpret the results thereof. The study has found there is strong positive correlation between selected macroeconomic variables and stock market efficiency. The authorities are expected to pursue economic growth, fiscal discipline and a relatively low interest rate to expected inflation rate.