Key points
- Nikkei jumped 3.3pc after a Japan-US trade deal cut auto tariffs
- Japan to invest $550 billion in the US: Trump
- Asian markets rallied on optimism over more trade deals
HONG KONG, China: Tokyo stocks surged Wednesday after Japan and the United States finally hammered out a trade deal to slash Donald Trump’s tariffs, including those on the crucial car sector.
Investors were also cheered by news that Washington had reached agreements with Indonesia and the Philippines, stoking optimism that other countries will achieve deals to avoid the worst of the US president’s levies.
Despite a lack of deals being made leading up to Trump’s self-imposed August 1 cut-off date, equity markets have been on the march in recent weeks on optimism that governments will eventually get over the line.
Japan had been one of those yet to sign, despite a string of trips to Washington by trade envoy Ryosei Akazawa, dampening investor sentiment in Tokyo.
But Trump said Tuesday that officials had agreed to a “massive” deal that would include a 15 per cent tariff on imports from Japan, down from the previously threatened 25 per cent.
Tokyo also managed to cut a deal to reduce tolls on its autos — a sector that accounts for eight percent of Japanese jobs — to 15 per cent, compared with 25 per cent for other countries.
“Largest deal ever”
“We just completed a massive Deal with Japan, perhaps the largest Deal ever made,” Trump announced on his Truth Social platform.
“Japan will invest, at my direction, $550 Billion Dollars into the United States, which will receive 90% of the Profits.”
He did not provide further details on the investment plan, but claimed the deal “will create Hundreds of Thousands of Jobs.”
With the deal on car shipments in the bag, Japanese Prime Minister Shigeru Ishiba said: “We are the first (country) in the world to reduce tariffs on automobiles and auto parts, with no limits on volume.”
“Mission accomplished”
Akazawa wrote on X: “Mission accomplished.”
However, he later said the 50 per cent levies on steel and aluminum were not part of the deal.
Traders poured back into the market, pushing the Nikkei up more than three percent to a one-year high thanks to soaring automakers.
Toyota rocketed more than 15 per cent, Mitsubishi almost 14 per cent and Nissan jumped close to 10 per cent.
Yen strengthens
The yen strengthened to 146.20 per dollar — compared with close to 148 Tuesday but it lost some weight after a top Bank of Japan official indicated it was not in any rush to hike interest rates.
However, analysts were cautious over the agreement.
Stefan Angrick at Moody’s Analytics warned the deal “is unlikely to be the final chapter in a saga that has bruised Japan’s economy”.
“Japan’s apparent ‘win’ is not that clear-cut; the country faced US tariffs in the low single digits before April and a 10 percent tariff since mid-April. It’s unclear when the new tariff rate will take effect,” he wrote in a commentary.
“It’s too early to assess the economic ramifications based on the superficial information available at the moment; the most that can be said at this point is that the 15 percent tariff is worse than what Japan had but better than what was threatened.”
Trump also hailed an agreement with Manila that will see the toll on Philippine goods lowered by one percentage point to 19 percent, while tariffs on Indonesia were slashed from 32 percent to 19 percent.
Shares in Manila and Jakarta rallied.
The announcements boosted hopes that other deals could be in the pipeline before next Friday’s deadline, though talks with the European Union and South Korea remain elusive for now.
Still, US Treasury Secretary Scott Bessent said he would meet his Chinese counterparts in Stockholm next week for talks, as a separate mid-August deadline approaches for US levies on Beijing to snap back to steeper levels.
Elsewhere in Asia, Hong Kong built on its 2025 surge to hit its highest level since late 2021, while Shanghai, Sydney, Singapore and Taipei, Seoul, Mumbai and Bangkok all enjoyed healthy buying interest.
The advances came after a broadly positive day on Wall Street where the S&P 500 hit another peak but the Nasdaq snapped a six-day streak of records.
Eyes are also on the release of earnings from Google parent Alphabet and other tech giants including Tesla and Intel.
Tokyo – Nikkei 225: UP 3.3 per cent at 41,098.86
Hong Kong – Hang Seng Index: UP 1.1 per cent at 25,413.48 (break)
Shanghai – Composite: UP 0.8 per cent at 3,608.58 (break)
Dollar/yen: UP at 146.70 yen from 146.66 yen Tuesday
Euro/dollar: DOWN at $1.1744 from $1.1755
Pound/dollar: UP at $1.3534 from $1.3532
Euro/pound: DOWN at 86.78 pence from 86.84 pence
West Texas Intermediate: UP 0.2 per cent at $65.45 per barrel
Brent North Sea Crude: UP 0.3 per cent at $68.77 per barrel
New York – Dow: UP 0.4 per cent at 44,502.44 (close)
London – FTSE 100: UP 0.1 per cent at 9,023.81 (close)
