Nikkei Rises Above 40,000-point Level; Concerns Easing Over Situation in Middle East
The Nikkei stock average on Friday morning rose above the 40,000-point level for the first time in five months.
The stock average fell sharply to around the 31,000-point level in April due to concerns about the global economy following the Trump administration's tariff policy. Since then, it has been on an upward trend. Currently, concerns about the deterioration of the situation in the Middle East have eased, and semiconductor-related stocks are performing well, pushing the market up.
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16 minutes ago
How 90 Days of Accelerated Trade Alliances Reshaped Southeast Asia
The significant global trade policy activity following the United States' announcement – and subsequent pause – of reciprocal tariffs is set to profoundly impact the future trajectory of international trade. Southeast Asia stands out, due to the staggering number of new multilateral alliances and bilateral partnerships it has found itself in the midst of. Three distinct power centers of trade – the European Union, China, and the Gulf Cooperation Council (GCC) – have emerged, with ambitions to strategically ramp up trade with the region. This is being complemented by efforts to strengthen existing relationships among Southeast Asian countries, including through leveraging digitalization to boost regional trade. Southeast Asian countries, having faced some of the highest reciprocal tariff rates under the Trump administration, were expected to proactively diversify their trade relationships. However, leading global trading powers – with the EU, China, and the GCC at the front of the line – have reached out first, showing they are more than keen to forge new partnerships. The motivation for this outreach is not rooted in just the manufacturing or export capabilities of the region but also its growing role as a consumer of global goods. The significant economic potential of Southeast Asia is actively reshaping its competitive edge and causing tectonic shifts in global trade relationships. International trade ties look set to strengthen in the Southeast Asian region and beyond, independent of the fate of the United States' reciprocal tariffs. Evolving Rhetoric on Global Trade As the 90-day pause on U.S. reciprocal tariffs approaches its July 9 end date, initial concerns about the imminent breakdown of a rules-based global trade order have notably shifted. Instead, the narrative is being shaped by overwhelming international consensus on the critical importance of a multilateral trading system. From Germany's former Chancellor Angela Merkel to Singapore's Deputy Prime Minister Gan Kim Yong, leaders from across the globe have been openly advocating for forging new alliances to not only defend but also expand a rules-based trading system. As a testament to the diversity of emerging alliances, the Association of Southeast Asian Nations (ASEAN) recently released a joint statement with Japan, China, and South Korea, reaffirming the group's commitment to multilateralism in trade. The continued preference for an open, inclusive, equitable, and transparent multilateral trading system indicates the value seen in the core tenet of free trade: realizing economic gains through pursuit of comparative advantage across borders. The risk from greater protectionism is not just limited to direct tariffs, but their second-order effects, including the overall collapse in global demand for goods from export-driven economies. Hence, countries recognize the critical importance of stepping up to keep free trade alive and are proactively building new frameworks of cooperation to achieve this goal. As economies take action to realign their trade priorities, Southeast Asia is fast emerging as an epicenter for engagement. In the 90 days since the announcement of Liberation Day tariffs, three distinct trade trends have emerged in Southeast Asia: diversification of trade partners, the emergence of new trade power centers, and an emphasis on intra-ASEAN trade. Diversification of Trade Partners to Build New Plurilateral Alliances Southeast Asian countries are pursuing previously unexplored trade partnerships to forge new alliances or build on existing economic groupings and plurilateral agreements. As one example, Malaysia hosted the first ever ASEAN-GCC-China summit on May 27. While this has not been formalized into a binding alliance, it is a first for this grouping of countries, representing more than 20 percent of the world's GDP, to unite and pursue mutual trade goals. There are three interconnected tracks that the group hopes to pursue, the ASEAN-China Free Trade Area (ACFTA) 3.0 Upgrade, the proposed ASEAN-GCC Free Trade Agreement (FTA), and indirectly, the China-GCC FTA. Separately, in a recent joint statement, members of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) announced their intention to commence trade dialogues with the EU and ASEAN. This is a novel association more for the EU than ASEAN, as the latter already has overlapping members (Brunei, Malaysia, Singapore, and Vietnam) with the CPTPP. While the EU is unlikely to formally join the CPTPP, closer cooperation can be expected in addressing trade barriers, coordinating response to the U.S. tariffs, and harmonizing rules in new areas such as digital trade and sustainability. Another economically formidable trade bloc consisting of ASEAN, the United Kingdom, and Australia, informally dubbed as ASEANAUK, has garnered interest recently. Its key goals are expected to be centered around promoting economic security and supply chain resilience. The CPTPP will be a key starting point, as the U.K., Australia, and four of ASEAN's 10 member-states already belong to the trans-Pacific trade bloc. Emergence of New Power Centers of Trade The growing economic prominence of Southeast Asian countries has attracted the attention of leading global trade powers. Europe, China, and the Gulf states are all strategically working to expand their spheres of influence in the region to forge new economic partnerships and fill the vacuum left by the U.S. For the first time ever, this year's edition of Asia's premier security forum, the Shangri-La Dialogue, featured a keynote by a European leader. French President Emmanuel Macron presented his argument for the creation of a new coalition between Europe and Asia to uphold global norms for open trade, calling it a 'third way' alternative to the U.S. and China. This is reflective of Europe's overall pivot toward outreach to like-minded rising Asian powers, which are currently among the fastest growing consumer markets globally. The EU has a number of active engagements with Southeast Asian markets. Recent developments include the signing of an Agreement on Digital Trade with Singapore to set global standards for digital trade and reinvigoration of trade negotiations with Indonesia, Malaysia, and Thailand. Within days of the United States' announcement of reciprocal tariffs, Chinese President Xi Jinping embarked on a three-country tour to the hardest hit economies in the Southeast Asian region. His goal was clear: to build meaningful partnerships for safeguarding the multilateral trading system. He visited Cambodia, Vietnam, and Malaysia to shore up trade ties and ended up signing 37, 45, and 31 agreements with these states, respectively. Following this, China reaffirmed its commitment to ASEAN, writ large, by concluding negotiations for the China-ASEAN FTA version 3.0, which includes new elements such as the digital and green economies. These are indicative of China's bolstered intent to intensify engagement with SEA economies in a bid to stand up a broader coalition to protect the global free trade system. As the newest bloc to strategically engage with the Southeast Asian region on trade, the GCC has been building momentum for the past few months through FTA negotiations with Indonesia, which are expected to conclude by the end of 2025. The GCC recently commenced FTA negotiations with Malaysia as well, on the sidelines of the ASEAN Summit. Another key outcome of this summit was the GCC signing up as a primary participant in the new ASEAN-GCC-China trading bloc. There are significant economic gains based on comparative advantage to be unlocked through these new relationships. Moreover, the GCC's size and spending potential promise to make it a valuable trade partner for ASEAN. Strengthened Intra-ASEAN Trade Commitment Amid increased international engagement, Southeast Asian countries are also renewing their commitment to regional cooperation through both rhetoric and concrete actions. In a macro-level effort to boost regional trade and deepen intra-ASEAN integration, the bloc recently concluded negotiations on an upgraded ASEAN Trade in Goods Agreement. This revision further lowers all remaining regional tariffs and significantly removes non-tariff barriers to improve trade flows and enhance regional supply chain resilience. Zooming in to the bilateral level, Thailand and Indonesia, Southeast Asia's two biggest economies, are setting up a joint government committee to promote bilateral trade. Vietnam recently upgraded its relationship with Thailand to 'comprehensive strategic partnership' status, the highest such ranking used by Hanoi, to significantly expand market access and boost investment. This is Vietnam's fourth such partnership with a fellow ASEAN country and indicates its interest in being a key participant in strengthening regional ties. There has also been increased traction for Singapore and Malaysia's newly announced Johor-Singapore Special Economic Zone, which is set to enhance the economic interlinkages between the two countries and be a platform for boosting ASEAN's overall supply chain resilience. Looking Ahead All the above movement in trade policy has occurred in just the last three months. The speed is a testament to the agility with which countries are willing to move to preserve an open global trading order. While a complete pivot away from the United States is not on any country's agenda, there is an emerging transition from the previous 'China + 1' strategy to a 'U.S. + n' approach. Here 'n' stands for proactive trade diversification by forging new relationships with not just one, but a number of countries. New trade alliances are excellent for realizing previously untapped comparative advantage-related gains and building closer geopolitical ties. This is something that middle powers such as the Southeast Asian countries are increasingly excelling at. If this continues, it looks like the future may belong to middle powers leading global economic growth through greater autonomy and close cooperation among each other. Such a truly multipolar world with numerous players championing free trade may have sounded fantastical just a few months ago, but apparently a lot can happen in 90 days.
Yomiuri Shimbun
30 minutes ago
- Yomiuri Shimbun
Japan's Nikkei Stock Average Ends at 6-Month High, Tracking Wall Street Rally
TOKYO, June 27 (Reuters) – Japan's Nikkei share average closed at a six-month high on Friday, as technology stocks tracked Wall Street's robust finish overnight. The Nikkei jumped 1.43% to 40,150.79, its highest closing level since December 27. The index rose 4.6% for the week, its sharpest weekly gain since the week of September 23, 2024. The broader Topix rose 1.28% to 2,840.54, gaining 2.5% for the week. 'Investors finally became willing to make long positions on U.S. stocks, underpinned by positive news around easing tensions in the Middle East and expectations for the interest rate cut,' said Takamasa Ikeda, senior portfolio manager at GCI Asset Management. 'Japanese equities mirrored the U.S. trend, led by stocks which are popular among foreign investors.' Overnight, Wall Street finished higher, with the S&P 500 and the Nasdaq just shy of record closing highs as the Israel-Iran ceasefire continued to hold and a raft of economic indicators appeared to support the case for the Federal Reserve lowering borrowing costs this year. In Japan, technology stocks rose, with chip-making equipment maker Tokyo Electron jumping 4.3% to boost the Nikkei the most. Tech start-up investor SoftBank Group rose 2.54%. Defense-related stocks Kawasaki Heavy Industries and Mitsubishi Heavy Industries rose 6.15% and 2.71%, respectively, on expectations of increased defense spending in Japan. Bucking the trend, chip-testing equipment maker Advantest lost 1.07%, weighing the most on the index, as investors booked profits from its more than 40% rise this month. 'Still, the rally on overall IT-related shares will continue. The market is just relocating their targets,' Ikeda said. Of the more than 1,600 stocks trading on the Tokyo Stock Exchange's prime market, 72% rose, 24% fell and 2% traded flat.
Kyodo News
35 minutes ago
- Kyodo News
NATO leaders agree to raise defense spending to 5% of GDP by 2035
KYODO NEWS - Jun 26, 2025 - 05:43 | World, All NATO allies agreed Wednesday to more than double their respective defense spending to 5 percent of gross domestic product by 2035, in step with U.S. President Donald Trump's demand. The agreement reached in The Hague at a summit of the North Atlantic Treaty Organization, the world's largest military alliance, is likely to lead the Trump administration to dial up pressure on Japan and other allies to take similar action. Under a major overhaul of their defense spending targets that hikes the figure from its current level of 2 percent of GDP, the leaders agreed that their 5 percent commitment comprises two categories of investment. NATO members pledged to increase spending over the next 10 years to at least 3.5 percent of their respective GDPs on "core defense," and another 1.5 percent on related critical infrastructure that supports militaries, such as upgrading ports, airfields and bridges. In a joint declaration, they reaffirmed their "ironclad commitment" to collective defense, such that "an attack on one is an attack on all." The 32-member transatlantic alliance, which last year marked the 75th anniversary of its foundation, will review "the trajectory and balance" of spending under the new plan in 2029. Trump has repeatedly complained that the United States has paid more than its fair share defending European countries. He has also raised doubts about whether he would honor a key clause of the alliance's treaty which requires all NATO members to come to the aid of any member under attack. On Wednesday, however, Trump eased such concerns, saying he "stands with" NATO's mutual defense. At a press conference, he called the security alliance's 5 percent spending deal a "big win." Related coverage: Trump likens U.S. strikes on Iran to bombings of Hiroshima, Nagasaki
