This paper studies the role of fluctuations in the aggregate consumption– w ealth ratio for predicting stock returns in Japan. Using quarterly Japanese stock market data, we find three main results that are different from US evidence. First, unlike in the US, fluctuations in Japan in the consumption– w ealth ratio are not strong predictors of real and excess stock returns. Second, we find that the dividend yield is a much better forecaster of future stock returns at short and intermediate horizons than is the consumption– w ealth ratio in Japan. This is also a different result than from the US. Third, as opposed to the US again, the relative risk-free rate in Japan shows almost no ability to predict excess stock returns in Japan, while the corresponding relative T-bill rate exhibits rather strong forecasting power for excess stock returns in the US.