The below chart shows the cumulative changes in both the USDJPY and the Nikkei and clearly this is a tight relationship nowadays….though clearly as discussed in a previous post this has not always been the case….
The rolling 6-month correlation confirms that the relationship has been positive though time varying…..and below significant critical threshold
The below plot is a bi-density chart of the USDJPY versus the Nikkei. the contour lines delimit the empirical joint distribution. The yellow line is the best fit derived from a quantile regression (akin to the historical fair value). The dotted red lines delimit the quantiles for the USDJPY. The bold red cross hair lines show where both the USDJPY and the Nikkei are trading at the most recent point.