"This looks like the selloff that so many on the sidelines have been waiting for, " said Nicholas Smith, CLSA's Japan Strategist in Tokyo.

CNN: How can Japan's stock slump actually be "a sign of health"?

"Monday's reaction to the Cyprus situation was not unexpected given stocks' stellar performance over the past several weeks, " said Nicholas Smith, Japan equity strategist at CLSA in Tokyo.

WSJ: Asian Shares Rise as Cyprus Concerns Ease

The second is related: Japanese corporate profits have, at least until 2007, historically risen when the yen was stronger, according to Nicholas Smith of CLSA, in large part because those periods of relative yen strength coincided with periods of strong global growth.

WSJ: Business Asia: Unearned Praise for Abenomics