Japan Indexes Extend 2-Day Rally to 5% After U.S. Trade Agreement

Akira Ito
24 Jul, 2025
Tokyo

Japan's indexes advanced for the third consecutive session as the recently announced trade deal between the U.S. and Japan continued to support market enthusiasm. 

The Nikkei 225 Stock Average increased 1.6%, the TOPIX gained 1.7%, and automobile makers led the gainers. 

The U.S. agreed to increase its import duties on Japanese goods to 12.5% from the current average of 3%, but lower than the threatened 25%.

The two sides agreed to a revised trade framework; however, details of the agreement and start date of the tariffs were not released.

Japanese officials confirmed that Japan will work to implement the revised trade agreement "as soon as possible" and asked the U.S. not to impose the 25% tariffs in the interim. 

Prime Minister Ishiba Shigeru said Japanese companies plan to invest $550 billion in the U.S., targeting semiconductor and pharmaceutical industries. 

After the deal announcement, Japanese stocks extended a two-day rally to 5%, led by a rebound in vehicle makers and semiconductor equipment companies.

Despite the market euphoria, higher U.S. tariffs on goods from Japan are likely to drag down the Japanese GDP by 0.5% and as much as 1% when additional tariffs on Japan's key trade partner, China, are included.

On the economic front, the private manufacturing sector activities fell into a contraction in July, after expanding in the previous month. 

The au Jibun Bank Japan Manufacturing PMI unexpectedly fell to 48.8 in July from June’s final reading of 50.1 and dropped to the lowest level in three months.

The downturn in manufacturing activities was driven by the lingering uncertainty about the U.S. tariff levels and weakness in export orders as businesses adopted a wait-and-see approach.

 

Japan Indexes and Stocks 

The Nikkei 225 Stock Average gained 1.6% to 41,822.92, and the broader TOPIX advanced 1.7% to 2,975.50. 

Toyota Motor Corp. decreased 0.4% to ¥2,844.50, Honda Motor Co. Ltd. inched higher 0.03% to ¥1,650.50, and Nissan Motor Co. Ltd. increased 1.6% to ¥334.50. 

Renault India is expected to acquire the remaining 51% stake in the joint venture with Nissan and take full control of the plant in Chennai, Tamil Nadu. 

Renault India is a wholly owned subsidiary of France's Renault Group.