The Impacts of International Political and Economic Events on Japanese Financial Markets

Abstract

Information about the possibilities of changes in national and international macroeconomic variables affects the expectations and behavior of individuals and firms more quickly than real changes in those macroeconomic variables. In this research, we investigate the impacts of international information (news) on the financial markets in Japan. We examine how news about the results of the Brexit referendum (BR) and the United States presidential election (USE) affected foreign exchange rates and stock market indexes. This research reveals evidence of statistically significant changes in exchange rates and stock market indexes within two weeks after the BR and USE, statistically significant changes in the exchange rate variance within the first week after the BR, and changes in the causality relationship between the variables after each event.