Japan Equity Strategy: Stock selection: hawkish FOMC meeting and Hormuz reopening

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Japan Equity Strategy: Stock selection: hawkish FOMC meeting and Hormuz reopening

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Japan Equity Strategy

Stock selection: hawkish FOMC meeting

and Hormuz reopening

Investment Strategy

AI rally continues, stock selection broadens 18 June 2026

The FOMC (Federal Open Market Committee) meeting held on 17 June was more Investment Strategy

hawkish than we had expected (see our 18 June US Watch report). On 18 June, Japanese Japan

equities were more affected by the US-Iran peace agreement. The rise in Japanese Masashi Akutsu >>

Strategist

equities strongly suggests a shift in funds by foreign investors. BofAS Japan

+81 3 6225 7754

The FOMC statement contained the phrase “The Committee will deliver price stability,” masashi.akutsu@bofa.com

which was intended to gain market confidence in curbing inflation (the statement did Tetsuhiro Tokuyama >>

not mention the Fed’s other mandate of maximizing employment). In addition, the core BofAS Japan

PCE (Personal Consumption Expenditures) outlook was raised significantly, and the +81 3 6225 8499 tetsuhiro.tokuyama@bofa.com

policy rate outlook was changed to include a rate hike. The median policy rate outlook

for 2026, which factored in one rate hike, might have been left unchanged if the

forecast of non-voting Chairman Warsh had been submitted. The statistical mode of the

policy rate was also unchanged. This did not strongly signal an urgent need for a rate

hike. However, it was enough to suggest a rate hike in the near future (our economists

maintain their forecast for no change in rates this year, but mention the risk of a future

rate hike). Furthermore, some uncertainty remains regarding potential changes to

balance sheet policy.

Since President Trump's declaration of an end to the war with Iran, AI stocks have