Shares in Japanese automakers rose sharply on Wednesday after the announcement of a trade agreement between Tokyo and Washington that appears to avert the imposition of steeper tariffs by the United States.
The Nikkei 225 index closed over three per cent higher, reaching a one-year high, led by significant gains in the automotive sector.
Toyota shares jumped by 11 per cent, while Honda advanced 9 per cent, following confirmation that a proposed 25 per cent tariff on Japanese vehicle exports to the US would instead be capped at 15 per cent under the new deal. Other manufacturers, including Nissan and Mitsubishi, also recorded notable gains.
The breakthrough was confirmed by US President Donald Trump via his Truth Social platform late Tuesday. He described the outcome as a “massive Deal” that includes $550 billion in Japanese investment in the United States. He did not provide further details on the nature or timeline of these investments, but claimed they would result in “hundreds of thousands of jobs” and return “90% of the profits” to the US.
The deal follows weeks of negotiations led by Japan’s trade envoy Ryosei Akazawa, whose repeated visits to Washington had failed to secure agreement until now. Japanese Prime Minister Shigeru Ishiba said the country had achieved “the first in the world” arrangement allowing tariff reductions on automobiles and auto parts without volume limitations. Akazawa later stated that the deal excludes steel and aluminium, which remain subject to 50 per cent tariffs.
The agreement appears to replace the previously threatened 25 per cent tariff that Trump had announced on 7 July for imports from both Japan and South Korea, due to take effect on 1 August. While the new 15 per cent figure represents a concession, analysts have pointed out that it remains above the single-digit tariffs Japan faced before mid-April, and above the 10 per cent level introduced in recent months.
The positive market reaction reflected investor relief that Japanese automakers, whose US exports are a core pillar of the country’s economy, would be spared the more severe tariff scenario. The automobile sector directly accounts for around 8 per cent of Japan’s employment.
Trump’s statement did not name individual automakers, but Japanese public broadcaster NHK reported that the agreement specifically covers the automotive sector, cutting the tariff from the earlier planned 25 per cent to 15 per cent.
The Trump administration also confirmed parallel trade agreements with Indonesia and the Philippines. Under those arrangements, tariffs on Indonesian goods were reduced from 32 per cent to 19 per cent, and Philippine exports will now be subject to a 19 per cent tariff, down from 20 per cent. Stock indices in Manila and Jakarta rose on the news.
Asian equity markets broadly followed Tokyo’s lead, with Hong Kong reaching its highest level since 2021 and indices in Shanghai, Seoul, Singapore, Sydney, Mumbai, Taipei and Bangkok all showing strong gains.
Negotiations continue with other major trading partners. No agreements have yet been finalised with the European Union or South Korea, although discussions are ongoing. Meanwhile, US Treasury Secretary Scott Bessent is due to meet Chinese counterparts in Stockholm next week. The US–China talks are aimed at forestalling the reimposition of higher tariffs scheduled for mid-August.
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