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Tokyo’s stock market surged on Wednesday, with the Nikkei 225 index climbing over 3% to a one-year high, following the announcement of a US-Japan trade deal that significantly reduces tariffs.
This agreement, which notably includes the crucial automotive sector, boosted investor confidence.
The deal, confirmed by President Donald Trump and Japanese Prime Minister Shigeru Ishiba, will see the US impose a 15% tariff on Japanese imports, down from a threatened 25%.
Crucially, tariffs on Japanese autos—a sector vital to 8% of Japan’s jobs—will also be cut to 15%, a more favourable rate than for other nations.
Trump hailed it as a “massive deal,” claiming Japan would invest $550 billion in the US, creating “hundreds of thousands of jobs,” though further details were not provided.
Ishiba celebrated the achievement, stating Japan is the “first (country) in the world to reduce tariffs on automobiles and auto parts, with no limits on volume.”
Market Optimism Amid Broader Tariff Developments
Investors were also buoyed by news that Washington had reached similar trade agreements with Indonesia and the Philippines, fostering optimism that other countries might secure deals before Trump’s August 1 deadline for new levies. These developments have generally fuelled a recent rally in equity markets despite earlier uncertainty.
Automakers led the charge in Tokyo, with Toyota rocketing over 15%, Mitsubishi nearly 14%, and Nissan jumping close to 10%.
Lorraine Tan, director of equity research in Asia at Morningstar, noted that the 15% reciprocal tariff rate aligns with their view that tariffs will have a “limited direct impact for most industries in Japan,” though the indirect risk of slower global demand due to ongoing tariff uncertainty remains.
Cautious Analysis and Other Asian Market Gains
While the yen strengthened against the dollar, analysts remained cautious about the long-term impact of the Japan deal.
Stefan Angrick at Moody’s Analytics suggested it’s “unlikely to be the final chapter,” pointing out that Japan’s previous tariffs were lower, and the exact effective date of the new rate is unclear.
He added that the 15% tariff is “worse than what Japan had but better than what was threatened.”
Beyond Tokyo, Asian markets mostly saw healthy gains, with Hong Kong hitting its highest level since late 2021, and Sydney, Singapore, Taipei, Seoul, Mumbai, and Bangkok all experiencing strong buying interest. Shanghai remained flat.
European markets in London, Paris, and Frankfurt also opened in the green, following a positive day on Wall Street, where the S&P 500 reached a new peak.
Attention is now turning to upcoming earnings reports from major tech companies like Alphabet, Tesla, and Intel.
