Japan’s tariff reprieve brought relief to markets as U.S. President Donald Trump delayed new import duties by three weeks. The Nikkei 225 climbed 0.26% to 39,688.81, while the Topix gained 0.17%. Investors welcomed the temporary pause, though auto sector risks remain.
Originally, Trump’s 25% tariffs on Japanese goods were set to take effect August 1. Now, negotiations get a brief extension. Prime Minister Shigeru Ishiba vowed to keep pushing for a deal. Yet talks remain deadlocked, primarily over auto trade.
“Reaching an agreement on autos looks very difficult,” said Masayuki Kichikawa of Sumitomo Mitsui DS Asset Management. He expects the 25% duty to stay unless Washington lowers it to 10%. For now, Japan’s tariff reprieve offers only short-term breathing room.
Political constraints add pressure. With Japan’s upper house elections on July 20, Ishiba’s government has little flexibility. Kichikawa noted, “We have no choice but to wait.” The outcome could shape future trade talks.
Despite the tariff threats, Japanese stocks rose. Exporters benefited from a weaker yen, which boosts overseas earnings. The dollar surged after Trump’s latest trade moves. Chipmakers led gains, with Advantest up 2.5% and Furukawa Electric soaring 6.5%.
Most automakers also advanced. Honda rose 0.8%, while Toyota gained 0.5%. However, Nissan plunged another 6.4%, extending its losing streak. Global trade tensions weighed on Wall Street, but Tokyo’s market found support in currency shifts.
Market analysts caution that while the delay provides temporary relief, underlying tensions persist. “The extension merely postpones the inevitable showdown over auto tariffs,” said Naomi Matsuoka, senior strategist at Mizuho Securities. “If Japan doesn’t offer meaningful concessions on agricultural market access, especially for sensitive products like beef and dairy, we could see these tariffs snap back with even tougher conditions.
“The uncertainty continues to loom over Japan’s export-driven economy, particularly for automakers who account for nearly 20% of the country’s total exports to the U.S. With the new deadline set just weeks after Japan’s elections, all eyes remain on whether Tokyo can craft a compromise that satisfies both domestic farmers and U.S. trade demands.
The delay suggests Trump may still seek concessions. Yet analysts warn Japan’s tariff reprieve could vanish without progress. Auto exports face the biggest threat, and prolonged duties may force supply chain changes.
For now, businesses watch nervously. The next three weeks will determine whether Japan avoids steep tariffs—or faces a costly trade war.
