[Breaking News] Japan-U.S. Trade Deal Lifts Nikkei, Yen Trading Remains Nervous

[Breaking News] Japan-U.S. Trade Deal Lifts Nikkei, Yen Trading Remains Nervous

✅ Summary of the Japan-U.S. Trade Agreement & Market Impact

The U.S. and Japan have announced a trade agreement featuring 15% reciprocal tariffs, partial opening of Japan’s automobile and agricultural markets, and $550 billion in direct investments by Japanese companies in the U.S.

The deal, reached just ahead of the August 1 implementation deadline, was seen as a surprise positive factor for markets.

Equity Market Reaction:

• The Nikkei 225 surged by as much as 1,500 points, led by auto stocks.

• Investor sentiment turned risk-on, driving short-term buying momentum.

FX Market Reaction:

• USD/JPY swung about 1 yen from the low 146s to the mid-147s.

• Initial reaction was yen buying, followed by a shift toward yen selling.

• However, direction remains uncertain, with choppy and nervous price action.

✅ Relief vs. Remaining Risks

Positive Factors:

• The trade deal removes one major uncertainty.

• U.S.-Japan trade friction fears have eased, boosting risk-on sentiment in equities.

Lingering Risks:

• Japan Political Uncertainty:

  • Reports suggest PM Ishiba may resign by late August.

  • Possible successors include Takai and Koizumi.

  • Prolonged political battles could turn into a negative factor for the yen.

• Japanese equities risk overheating, raising the chance of profit-taking corrections.

Market Psychology:

• “Trade Relief” vs. “Political Uncertainty”
  → FX likely to remain range-bound and sensitive to headlines in the near term.

✅ Next Market Drivers

U.S.-EU Trade Negotiations:

• Japan’s concessions may embolden the U.S. to pressure the EU.

• Negotiation failure could reignite tariff risks.

U.S. Economic Data:

• MBA Mortgage Applications (July 12–18)

• Existing Home Sales (June): Forecast 4.00M (prior 4.03M)

• Eurozone Consumer Confidence (Flash)

Key Events:

• Trump speech on “AI Competition”

• U.S. Weekly Crude Oil Inventories, 20-Year Bond Auction ($13B)

• Corporate Earnings: T-Mobile, Alphabet, AT&T, IBM, Tesla

Japan Government Comments:

• Finance Minister Kato: “No currency clause included” → Limited market impact.

✅ Outlook & Strategic Takeaways

• Trade deal = bullish for equities, but FX remains sensitive to political risk and Fed policy expectations.

• Key watch points:

  • Japan’s political developments

  • Fed independence issue & U.S. rate outlook

  • Progress in U.S.-EU trade talks

Strategic View:

• Short-term: USD/JPY expected to trade in 146.80–147.80 range

• Headline-driven breakout possible → tight stop management essential