By employing the vector error correction model (VECM) in a system of seven equations, we find that the Japanese stock market is cointegrated with a group of six macroeconomic variables. The signs of the long‐term elasticity coefficients of the macroeconomic variables on stock prices generally support the hypothesized equilibrium relations. Our findings are robust to different combinations of macroeconomic variables in six‐dimension systems and two subperiods. Also, the VECM consistently outperforms the vector autoregressive model in forecasting ability.