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- Trump announces “massive deal” with Japan including $550bn in investment
- Media reports indicate auto tariff rate lowered to 15%
- Nikkei rips higher, USD/JPY resumes slide after brief rebound
- PM Ishiba under pressure after historic LDP election defeat
President Donald Trump’s latest “massive deal” with Japan lifts the Nikkei but raises more questions than answers. USD/JPY stays heavy, and political pressure remains on PM Ishiba after a crushing election loss. The announcement of a new trade deal with Japan has sparked major market moves, sending Japanese stocks higher and weighing on USD/JPY.
While the agreement includes hefty Japanese investment into the US and greater access for U.S. exporters, details remain murky. Attention now turns to the political fallout in Japan and how markets may continue to respond, particularly with USD/JPY under pressure and the Nikkei 225 eyeing a potential breakout.
’Massive’ Deal Reached
Donald Trump says the U.S. and Japan have struck a "massive" trade deal that will see a 15% reciprocal tariff slapped on U.S. goods imports from Japan. Writing on Truth Social, the President claimed the agreement includes $550 billion in Japanese investment into the U.S., along with improved access for American exporters of cars, trucks, rice, and other goods.
Notably, there was no mention of any relief on the 25% tariff currently applied to Japanese car imports. A report from media outlet NHK, citing a Japanese government official, stated the sectoral tariff rate of 25% would not be applied in addition to the reciprocal rate, buoying automakers.
For now, broader details remain vague. Neither the White House nor Japan’s foreign ministry has commented on the announcement. The statement follows a meeting between Trump and Japan’s top tariff negotiator, Ryosei Akazawa, in Washington earlier Tuesday.
Despite the lack of detail, Japanese shares have surged. After initially wavering on the headlines, USD/JPY resumed its slide lower, while long-dated Japanese government bond yields are trading higher.
The question now is what it means for under-siege Prime Minister Ishiba after the ruling LDP coalition he leads lost control of both houses of parliament following upper house elections held over the weekend. He’s yet to comment on the agreement.
USD/JPY Slide Resumes
Source: TradingView
USD/JPY remains heavy on the charts after breaking uptrend support earlier this week. Horizontal support was taken out at 147.00 on Tuesday prior to the tariff announcement. Tellingly, after trying to break back above the level initially on the news, the pair was once again rejected before resuming its push lower. 146.00 and 144.40 are the next downside support levels of note. The 50-day moving average is also found at 145.16.
Momentum indicators are shifting neutral with RSI (14) trending lower and just above 50, while MACD has crossed over the signal line above zero, signalling waning topside momentum. More emphasis should be put on price signals to guide decision-making in this environment, rather than a specific bias.
Nikkei Eyes June Highs
Source: TradingView
When it comes to the Nikkei 225 contract, it’s ripped higher on the announcement, bouncing strongly from uptrend support established in May. As things stand, a potential retest of the June 30 high may be on the cards, with a break above that level increasing the risk of a move towards horizontal resistance at 41600 or even 42480—the record high set in July 2024. On the downside, support is found at the May uptrend and again at 39162.
Momentum indicators are perking up, pointing to building bullish momentum. RSI (14) has set a new higher high and sits in the 60s, while MACD looks like it may soon cross the signal line above zero, confirming the bullish signal.