In June, the Japanese stock market was in a back-and-forth phase until late in the month, with bank stocks affected by lower long-term interest rates in Japan and the U.S. and auto stocks affected by the revelation of fraudulent activities involving type-designation certification, but by the end of the month, the Nikkei Stock Average rose 2.85% on the back of yen depreciation.

In the early part of the session, corporate statistics for the January-March period showed solid growth in capital investment, which led to a rally, but the gains were gradually reduced by declines in bank stocks due to lower long-term interest rates in Japan and the U.S. and in auto stocks due to fraud over type-designation certifications. By mid-market, a rise in the U.S. high-tech sector led to a rally in electronic components and other semiconductor-related stocks, but these stocks fell as the Bank of Japan postponed an announcement of specific measures to reduce its purchases of government bonds and political uncertainty in Europe, particularly in France, increased uncertainty about the future. In the latter half of the session, as the yen weakened further and yen interest rates began to rise, auto and bank stocks, which had been leading the decline so far, returned to their previous highs and rallied sharply. By industry, insurance, warehouses, and services rose, while electric & gas, rubber, and shipping declined.

In July, the Japanese stock market is expected to make progress against fiscal year plans due to the benefits of the weak yen and other factors, although companies are expected to maintain a conservative stance on their full-year earnings forecasts in the April-June earnings announcements of major companies starting in late July. Expectations of interest rate cuts by U.S. and European central banks will also support the stock market, which is expected to rise slightly.

Although there are signs that price hikes in the U.S. are subsiding, some economic indicators are still weak, and monthly economic indicators such as those related to prices will continue to attract attention ahead of the FOMC (Federal Open Market Committee) meeting to be held at the end of July. In Japan, if the monthly labor statistics for May confirm an improving trend in real wages, and the Bank of Japan (BOJ) increases its certainty to normalize its monetary policy, it will be a reassuring factor for the stock market.

In July, retail companies will begin announcing their financial results in early July, and major companies, mainly export-related companies, will begin announcing their financial results in late July. Many of the companies' annual plans announced at the beginning of the fiscal year fell short of market expectations, and this is said to be one of the reasons for the delay in Japanese stocks, but at the same time last year, there were still restrictions on activities and supply due to the new coronavirus infection. In addition, the recent depreciation of the yen against the U.S. dollar versus the same period of the previous year suggests that profits will continue to rise in the April-June period, especially among export-related companies, and that an upward swing against the conservative company plan can be expected. Japanese companies are making progress in their efforts to improve capital efficiency, and if their strong performance is confirmed, we expect the market to gradually move higher on the back of expectations for shareholder returns.

General elections are scheduled in the U.K. and France, both of which are dominated by opposition parties. Uncertainty over the economic and fiscal policies that will accompany the change of government may lead to a temporary risk-off trend, which should be kept in mind.