Japan's Nikkei stock price index just rose to a new record high. It's been a long time coming given that the previous record high occurred on January 3, 1990 (chart). Perversely, the new high coincides with Japan falling into a recession during the second half of last year. If the economy is weak, why is the stock market so strong?
A weak economy suggests that the Bank of Japan (BOJ) will continue to keep its official lending rate close to zero and certainly well below the federal funds rate in the US (chart). So the BOJ's lower-for-longer interest rate policy will continue to diverge significantly from the Fed's higher-for-longer interest rate policy.
