Tokyo's Nikkei leads Asian rally after Japan-US trade deal

Malay Mail

23-07-2025

HONG KONG, July 23 — Tokyo stocks surged toda 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 also follow suit.
Despite a lack of deals ahead of Trump's August 1 deadline, equity markets have been on the march in recent weeks on optimism that governments will eventually get over the line.
Investor sentiment in Tokyo had been subdued as Japanese trade envoy Ryosei Akazawa travelled seven times to Washington since April in a bid to persuade Trump to scrap the levies.
But the US president announced yesterday a 'massive' deal lowering tariffs on some Japanese goods to 15 per cent, down from the threatened 25 per cent.
Tokyo also cut a deal to reduce tolls on its autos — a sector accounting for 8 per cent of Japanese jobs — to 15 per cent, compared, with 25 per cent for other countries.
'Japan will invest, at my direction, US$550 Billion Dollars into the United States, which will receive 90% of the Profits,' Trump said on social media.
He did not provide details on the investment plan, but claimed the deal 'will create Hundreds of Thousands of Jobs.'
With car shipments deal 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.'
Akazawa wrote on social media: 'Mission accomplished.'
However, he later said the 50 per cent levies on steel and aluminium were not part of the deal.
Traders poured back into the market, pushing the Nikkei up more than 3 per cent to a one-year high thanks to soaring automakers.
Toyota rocketed more than 14 per cent, Mitsubishi 13 per cent and Nissan jumped more than 8 per cent.
'With the reciprocal tariff rate at 15 per cent, our base case view that tariffs should have a limited direct impact for most industries in Japan is unchanged,' said Lorraine Tan Morningstar's director of equity research in Asia.
'The key risk remains the indirect impact of slower global demand given ongoing tariff uncertainty.'
'Win not clear-cut'
The yen strengthened to 146.20 per dollar — compared with close to 148 yesterday 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 per cent tariff since mid-April. It's unclear when the new tariff rate will take effect,' he said.
'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 per cent tariff is worse than what Japan had but better than what was threatened.'
Trump also hailed an agreement with Manila to lower the toll on Philippine goods by 1 percentage point to 19 per cent, while tariffs on Indonesia were slashed from 32 per cent to 19 per cent.
Shares in Manila and Jakarta rallied.
The announcements boosted hopes of other deals before next Friday's deadline, though talks with the European Union and South Korea remain elusive.
Still, US Treasury Secretary Scott Bessent said he would meet his Chinese counterparts in Stockholm next week, as a separate mid-August deadline approaches for US levies on China to return to steeper levels.
Elsewhere in Asia, Hong Kong hit its highest level since late 2021, while Sydney, Singapore and Taipei, Seoul, Mumbai and Bangkok all enjoyed healthy buying interest. Shanghai was flat.
London started the day in the green with Paris and Frankfurt.
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 tech giants including Tesla and Intel. — AFP