HONG KONG: Tokyo stocks surged on Wednesday (Jul 23) 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 Aug 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 8 per cent of Japanese jobs – to 15 per cent, compared with 25 per cent for other countries.
“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 per cent of the Profits.”
He did not provide further details on the investment plan, but claimed the deal “will create Hundreds of Thousands of Jobs”.
Japanese Prime Minister Shigeru Ishiba said that he needed to examine the deal before commenting.
Akazawa wrote on X: “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 thanks to soaring automakers.
Toyota rocketed more than 15 per cent, Mitsubishi almost 14 per cent and Nissan jumped close to 10 per cent.
The yen strengthened to 146.20 per dollar – compared with close to 148 on Tuesday. The unit had already enjoyed a recent tick-up after Ishiba vowed to remain in office despite a devastating weekend election loss.
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 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 per cent 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 per cent, while tariffs on Indonesia were slashed from 32 per cent to 19 per cent.
Shares in Manila and Jakarta rose.
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