Forget about the Sun, Japan is now the land of the rising stock market. This year alone, the Nikkei 225 is up 36.4%. While the actual returns in dollar adjusted terms are quite a bit less (19%), Japan is still one of the top performing equity markets in the world this year.

(click to enlarge)The strong start to 2013 for equities in Japan is also far and

While many of our famous macroeconomists, pundits and bloggers insist we need fiscal stimulus because the Fed and BoE and ECB are out of ammunition, Japan continues to prove them wrong:

Kuroda’s first policy meeting since taking office on March 20 was seen as a big test of his ability to steer the BOJ towards unorthodox measures to meet the inflation target it adopted in January, and markets liked what they saw.

Government bond futures soared and the benchmark 10-year bond yield hit 0.425 percent, its lowest ever. The yen, which had been creeping up in the run-up to the meeting, plunged, driving the dollar up by more than 2 percent to around 95.25 yen from around 92.90 before the decision.

The Nikkei stock index unwound losses of more than 2 percent to end up 2.2 percent, just shy of a 4-1/2 year closing high hit last month.

The

By Gregg Fisher, CFA

Conventional wisdom holds that if a global stock investor is able to identify which countries’ economies will grow briskly and which will lag, he has conquered half of the investment battle. Economic growth should translate into higher corporate earnings per share and thus rising stock prices, so the investor should favor the economies where he anticipates zippy economic growth. Sound simple?

Actually, it’s not. In theory, over long time frames, earnings growth should track economic expansion and equity returns should reflect that earnings growth. But over shorter time frames, these relationships can break down. When Gerstein Fisher analyzed the historical relationship between GDP growth and stock price performance in eight major developed and developing countries between January 1, 1994 and December 31, 2011 (see graph), the results were quite startling. We found that the correlation between annual stock returns and economic growth was actually pretty tenuous