<p>This paper analyzes the pricing implications of liquidity changes in the Japanese stock market, focusing on how these changes can help predict stock returns in the following month. Liquidity changes were measured over 1, 6, 12, 36, and 60 months, and their relationship with subsequent monthly returns was examined. The results indicate that short-term liquidity changes (one month) are positively correlated with returns in the following month, whereas long-term liquidity changes (60 months) are negatively correlated. These findings suggest that stock markets underreact to short-term liquidity changes but respond appropriately to long-term liquidity changes. Moreover, the study confirms the role of liquidity levels in the price adjustment following liquidity changes. This paper sheds further light on the impact of liquidity dynamics on stock returns and provides new insights into how the liquidity premium influences stock price adjustments.</p>