Japanese and US Stock Markets: A Week Full of Events

■ Changes in central bank communication methods during Japan-US monetary policy meetings may impact stock prices.  

■ Attention should be paid to changes in stock supply and demand, as these could exert downward pressure on stock indices in the short or medium term. 
 
This week will be a busy one for both the Japanese and US markets. Regarding monetary policy, the market will focus on communication between central banks and the market. From the 15th to the 16th, the Bank of Japan will hold a monetary policy meeting, with the market widely expecting a 0.25 percentage point increase in the policy rate to 1.00%. Due to the hospitalization of Bank of Japan Governor Kazuo Ueda, it is reported that Deputy Governor Shinichi Uchida will attend the post-meeting press conference. If he signals support for accelerating the pace of interest rate hikes, it could curb the current depreciation trend of the yen; therefore, the market will closely monitor the content of his remarks and the resulting market reaction. In addition, from the 16th to the 17th, the US Federal Open Market Committee (FOMC) will hold a meeting. The market expects the policy rate to remain unchanged, but the Summary of Economic Projections (SEP) will be updated; therefore, it is worth noting whether the FOMC members' views on inflation and the policy rate outlook have changed. At Federal Reserve Chairman Warsh's press conference, the market hopes to glean insights into the future direction of monetary policy based on his assessment of recent inflation trends. Fed chairs often experience a period of adjustment and communication with the market at the beginning of their terms, so caution is warranted. 

 
Simultaneously, the impact of changes in stock supply and demand on stock prices should be closely monitored. Last weekend, a US aerospace company completed its initial public offering (IPO). The stock closed above its offering price, indicating strong market demand, but it remains to be seen whether investors will continue to sell existing holdings to raise funds to purchase the company's stock. Furthermore, due to the Juneteenth holiday (Remembrance Day) in the US on June 19th, the US stock market will be closed. Therefore, the day before, June 18th, coincides with "Triple Witching," a day when stock index futures and other derivative contracts expire. Against the backdrop of market participants adjusting their positions, the market may experience sharp fluctuations driven by the supply and demand of funds. 
 
It is worth noting that, in the longer term, stock supply and demand could also become a factor in a stock market decline. The lock-up periods imposed on existing shareholders by the aforementioned US aerospace company are expected to gradually expire starting this summer, potentially putting pressure on the stock price. Furthermore, two emerging artificial intelligence (AI) companies plan to IPO this fall. Although their market capitalization at the time of listing is not expected to be as large as the aerospace companies', their target market capitalization is reportedly over $1 trillion. Pre-IPO profit-taking and increased selling pressure after the lock-up periods expire are both concerns. Meanwhile, several large cloud computing service providers (such as Hyperscaler) have announced equity financing through new share issuances to advance AI-related capital expenditures. While such investments are expected to drive demand growth and support stock prices in the long term, in the short term, this could still be seen as a factor of deteriorating supply and demand, suppressing stock prices. Other factors, such as the increased number of issued shares due to large-scale IPOs and reduced share buybacks by companies amidst the expansion of AI-related investments, could weaken the improvement in earnings per share (EPS). The market needs to be wary of whether the capital operation strategies of US companies will exert sustained downward pressure on the overall stock index.