Japan and Europe Stock Markets Surge on Japan-US Trade Agreement
The news of Japan reaching a trade agreement with the United States has boosted both the Japanese and European stock markets. On Wednesday (23rd), the Japanese stock market soared to a one-year high, reigniting hopes of a U.S.-Europe agreement and boosting the European stock futures market.
U.S. President Trump announced on Tuesday that the U.S.-Japan trade agreement will include a 15% tariff on goods imported from Japan to the U.S. Earlier, the U.S. had signed an agreement with the Philippines and imposed a 19% tariff on goods imported from the Philippines.
Trump also stated that representatives from the European Union would visit the U.S. for trade negotiations on Wednesday. Despite the EU mentioning they are working on countermeasures, the completion of the U.S.-Japan agreement has revitalized hopes of a European agreement with the U.S.
On Wednesday, EUROSTOXX 50 futures in Europe jumped by 1.3%, while Germany’s DAX futures rose by 0.6%.
Charu Chanana, a market strategist at Saxo Bank, mentioned, “Market expectations for a breakthrough in the U.S.-Japan negotiations were low, so Trump’s announcement brought a mild positive surprise – providing short-term relief to the Japanese stock market.”
“In terms of strategy, the agreement allows Japan to avoid an immediate tariff escalation, as Trump shifts his focus elsewhere.”
The Nikkei index in Japan rose by 3.7% as the U.S. reduced the expected automobile tariffs from 25% to 15%, leading to a significant increase in the share prices of car manufacturers. Mazda Motor’s stocks surged by 17%, while Toyota Motor rose by 13.6%.
Shares of South Korean car manufacturers also saw increases, as the completion of the U.S.-Japan agreement sparked optimism for the U.S.-South Korea tariff negotiations.
Market analysts point out that the U.S.-Japan trade agreement has reduced the major risks facing Japan’s fragile economy, providing the Bank of Japan with more room to raise interest rates to combat inflation.
Meanwhile, the 10-year Japanese government bond yield rose sharply by 8.5 basis points to 1.585%.
There are also reports indicating that Japanese Prime Minister Shigeru Ishiba is set to resign, taking responsibility for the ruling coalition’s defeat in the upper house election on Sunday.
Political uncertainties have reversed the yen’s early gains driven by the U.S.-Japan agreement, leading to a slight 0.2% increase in the USD/JPY exchange rate to 146.95.
(This article referenced reports from Reuters)