We study, using a structural vector autoregressive (SVAR) model, the relationship between oil price shocks and the Japanese stock market. We find that oil price shocks that arise from changes in aggregate global demand are positively correlated to returns on the Japanese stock market. Thus, in contrast to the conventional wisdom, a rise in oil price is not always bad news for the Japanese stock market. On the other hand, the Japanese stock market reacts negatively to oil price increases related to oil-market specific demand shocks. Finally, different from prior research using U.S. stock market data, we find that supply and demand shocks in the global crude oil market affect returns to the Japanese stock market index through changes to expected real cash flows rather than to changes to expected returns.