Asian markets surged on Wednesday, led by the rally in Japanese shares, after US President Donald Trump announced a trade deal with Japan that eased tariffs and boosted investor sentiments.Japan’s Nikkei surged 2.6% on Wednesday, driven by a rally in automaker stocks after news that the auto tariff would be cut to 15% from a proposed 25%. Mazda Motor soared 17%, while Toyota rose 11%, reported the news agency Reuters.Meanwhile, Japanese government bonds fell, with 10-year yields jumping 8.5 basis points to 1.585%, as easing trade uncertainty opened the door for potential rate hikes by the Bank of Japan.The agreement includes a mellowed 15 percent tariff on Japanese exports to the US, as against the threatened 25 per cent. Trump announced the trade deal late on Tuesday.“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% of the profits,” he added.Trump did not provide further details on the investment plan, but claimed the deal “will create hundreds of thousands of jobs.”Sentiments were further lifted by the additional deals announced with Indonesia and the Philippines, raising optimism that other countries would soon reach an agreement soon, leading to a broader trade relief amid tariff tension. Manilla will have to pay a 19 percent tariff on exports to Washington. Tariffs on Indonesian exports were also cut, from 32 percent to 19 percent.“Expectations for a breakthrough were low, so Trump’s announcement delivers a mild upside surprise – providing near-term relief for Japanese equities,” said Charu Chanana, chief investment strategist at Saxo, reported news agency Reuters.“Strategically, the deal allows Japan to sidestep immediate tariff escalation, while Trump’s attention shifts elsewhere,” he added.Even as Trump’s self-imposed August 1 deadline for trade deal nears with not many deals in the basket to show, the equity markets have been running high in recent weeks on the hope that countries would eventually reach an agreement before the time runs out.Japan had remained among the few major economies in finalizing a trade agreement, despite multiple visits to the US by trade envoy Ryosei Akazawa, a delay that had weighed on investor confidence in Tokyo.Yen saw a muted reaction, inching up just 0.1% to 146.42 per dollar. Market caution lingered as Prime Minister Shigeru Ishiba was reportedly weighing whether to step down, depending on the trade deal’s impact, according to the Yomiuri newspaper, according to Reuters.President Trump also said that EU representatives would arrive Wednesday for trade talks.With the agreement on car shipments secured, PM Ishiba said, “We are the first (country) in the world to reduce tariffs on automobiles and auto parts, with no limits on volume,” reported news agency AFP.While trade envoy Ryosei Akazawa posted on X – “Mission accomplished.”However, he later clarified that the 50 percent tariffs on steel and aluminum were not included in the deal.Despite the deal, experts have issued caution. Stefan Angrick of Moody’s Analytics warned it’s “unlikely to be the final chapter in a saga that has bruised Japan’s economy,” reported AFP.“Japan’s apparent ‘win’ is not that clear-cut; the country faced US tariffs in the low single digits before April and a 10 percent tariff since mid-April. It’s unclear when the new tariff rate will take effect,” he wrote.Angrick added, “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 percent tariff is worse than what Japan had but better than what was threatened.”Meanwhile, US treasury secretary Scott Bessent announced plans to meet with his Chinese counterparts in Stockholm next week, ahead of a mid-August deadline when US tariffs on Beijing could increase again.While, across Asia, Hong Kong extended its 2025 rally to reach its highest level since late 2021. Other markets, including Shanghai, Sydney, Singapore, Taipei, Seoul, Mumbai, and Bangkok, also saw strong buying activity.
