US-Japan Trade Deal: Tokyo’s benchmark stock index Nikkei 225 surged to record highs on July 23 after the announcement of a new trade deal between the United States and Japan.
The Nikkei 225 jumped as much as 4 per cent during the session, hitting an all-time high of 41,342.59, before settling 3.51 per cent higher at 41,171.32.
The broader Topix index also rallied, climbing as much as 3.5 per cent to a record 2,937.71. It ended the day up 3.18 per cent at 2,926.38.
US President Donald Trump earlier today took to his social media platform Truth Social to announce the deal. “We just completed a massive Deal with Japan, perhaps the largest Deal ever made,” the post read.
The Nikkei 225 index had crashed nearly 13 per cent over a week, between April 2 and April 7, when the initial tariffs were announced. From its April lows, the benchmark index has rallied nearly 33 per cent. On an year-to-date basis, the index has yielded a return of 4.75 per cent.
US-Japan Trade Deal
In his post, Trump said Japan will now face a 15 per cent reciprocal tariff. This is lower than the 24 per cent tariff he had first threatened in April. Later, that rate was raised to 25 per cent when Trump sent letters to several countries, including Japan.
Trump said Japan will invest $550 billion in the US, as part of the trade deal, of which the US is expected to receive 90 per cent of the profits.
According to Trump's post, Japan will open its market to trade in areas such as cars and trucks, rice, certain agricultural products, and other goods.
“This is a very exciting time for the United States of America, and especially for the fact that we will continue to always have a great relationship with the Country of Japan,” Trump further said in his post.
Japan Elections 2025 Adds Uncertainty
These market gains also come amid political upheaval in Japan. The country held its upper house election on July 20. The ruling Liberal Democratic Party (LDP) and its coalition partner Komeito failed to secure a majority in the 248-member upper house.
Prime Minister Shigeru Ishiba-led coalition had previously lost majority in the lower house as well. With this recent loss, Ishiba now lacks majority in both the houses of the Parliament. This could make it even more difficult for his government to execute and policy measures or reforms effectively, further stoking uncertainty for investors going forward.
After the recent election outcome, Ishiba had come under mounting pressure to resign from his office. However, he said he will make a decision after closely studying the US-Japan trade deal terms.
