Tokyo Surges on Trade Deal Relief as Asian Markets Drift into Weekend

Japanese stocks soared on Friday, buoyed by relief following the resolution of a tariff dispute between Tokyo and Washington that had threatened their trade agreement. This optimism was further fuelled by strong earnings reports from major market players Sony and SoftBank, sparking a notable rally in the technology sector.

Market Highlights and Key Drivers:

• Nikkei 225 surged over 2%, led by a rebound in the automotive and tech sectors.
• Japan’s tariffs envoy, Ryosei Akazawa, indicated that Washington is expected to revise an executive order that had imposed layered tariffs.
• Crucially, vehicle tariffs on Japanese cars were reduced, supporting Japan’s export-driven economy.
• Toyota shares jumped nearly 4%, while Nissan climbed more than 3%.
• SoftBank soared over 13% to a record high, buoyed by a strong quarterly profit driven by its Vision Fund.
• Sony added more than 4%, extending gains from the previous day after raising its annual profit forecast, largely thanks to its gaming division.

Mixed Performance Across Asia:

Broader Economic and Trade Context:

• Investors are closely watching ongoing US trade negotiations following President Trump’s recent imposition of tariffs. Countries such as India and Switzerland are urgently seeking agreements.
• Attention also focuses on China-US talks aimed at extending the current 90-day truce, which expires on August 12. Markets remain cautious, mindful of potential escalations.
• Bank of America economists warn of ongoing uncertainty in US-China relations, suggesting any failure to uphold commitments could spark renewed tensions.
• Concerns also include potential penalties for China regarding crude oil imports from Russia.

US Dollar and Federal Reserve Outlook:

• The dollar maintained losses amid speculation that the Federal Reserve may cut interest rates.
• This sentiment was strengthened by President Trump’s recent nomination of Stephen Miran, chair of his Council of Economic Advisers, to a vacant governor role at the Fed.
• Miran is known to support interest rate cuts and has been critical of Fed policy in the past.
• Tapas Strickland of National Australia Bank noted: “Miran has been very critical of US Fed policy and would likely advocate for cuts. This makes at least two rate cuts by the end of the year much more probable.”
• The greenback has been under pressure following disappointing US job creation data for May, June, and July.

Market Figures (at approximately 02:50 GMT):

The mixed performance across Asian markets reflects a cautious mood ahead of weekend trading, while Tokyo’s rally provides a boost on the back of eased trade tensions and strong corporate earnings.