The consumption-wealth ratio, real estate wealth, and the Japanese stock market

► We construct a Japanese consumption-wealth ratio (CAY) data series following the works of Lettau and Ludvigson for the US. ► We propose new CAY that more explicitly deal with household real estate wealth utilizing Japanese aggregate-level data. ► Such “real estate augmented” CAY performs better in explaining Japanese stock market data. ► Japanese CAY does predict future stock returns, but the evidence is weaker than that from US data. ► Japanese CAY also helps to explain cross-sectional Japanese stock returns.