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▼ Japan Markets Wobble As Trump Talks Of New Steel Tariffs For 'Everyone'
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The nervousness that pervaded Japanese markets on Friday turned briefly to relief after Prime Minister Shigeru Ishiba’s meeting with U.S. President Donald Trump, then back to uncertainty on Monday after the U.S. president flagged tariffs on imports of steel and aluminum.
Trump’s talk of imposing reciprocal tariffs on "everyone” has also provided a stark reminder of the risks that face all of America’s trading partners, including Japan. Yet the amicable atmosphere of their first summit on Friday has the potential to help support Japanese stocks in the medium term, according to investors.
"There had been concerns that Trump may impose tariffs on Japanese cars,” said Daiju Aoki, regional chief investment officer at UBS SuMi Trust Wealth Management in Tokyo.
"There were no tariffs. In terms of the yen, they just confirmed that their finance chiefs would be in close touch. And there were no new demands on Japan’s defense spending. It will be a relief for markets.”
Japan’s 225-issue Nikkei Stock Average traded 0.1% down in early Monday trade, as a boost from the summit was offset by worries about rising U.S. inflation expectations and Trump’s comments that he will announce 25% tariffs on all imports of steel and aluminum.
The latter sent steelmaker shares down, with Nippon Steel falling as much as 2.6%.
Trump also said the Japanese steelmaker cannot own a majority stake in U.S. Steel after the leaders suggested they are working on an alternative plan for the Japanese company to make an investment that stops short of an outright purchase. The $14.1 billion bid for the iconic U.S. firm was blocked by the Biden administration.
With Trump seeking to eliminate his nation’s trade deficit with Japan, Ishiba agreed to buy more American liquefied natural gas (LNG), and revealed plans by Toyota and Isuzu Motors to invest more in the United States.
"The friendly tone and substance of the summit, especially in regard to Japan’s high profile investment in the U.S. steel sector, should provide a modest relief to Japanese investors,” said Homin Lee, senior macro strategist at Lombard Odier in Singapore, adding that the firm is "constructive” on Japanese stocks.
Currency analysts said the yen was likely to show a muted response as it didn’t become a focal point of the conversation, even though its weakness has been one of Trump’s long-held concerns regarding Japan.
A lack of verbal intervention from Trump saw the yen softening 0.2% to ¥151.76 per dollar, though it remained not far from a two-month high of ¥150.93 touched on Friday.
Mari Iwashita, executive economist at Daiwa Securities, said the yen could become a safe haven if markets perceive Trump’s stance on tariff against Japan as less severe than previously thought.
Buying more LNG from the U.S. and investing more there would eventually mean more demand from Japan to buy dollars, said Masayuki Koguchi, executive chief fund manager at Mitsubishi UFJ Asset Management.
Ishiba’s handling of his meeting with Trump has the potential to boost the popularity of the ruling Liberal Democratic Party, said Fumio Matsumoto, chief strategist at Okasan Securities.
At the margin, this may be positive for Japanese stocks ahead of an Upper House election later this year, given that concerns about political instability have weighed on the market since Ishiba lost an outright majority in the Lower House in an election last year.
To be sure, the relief following the Ishiba-Trump meeting hasn’t removed risks, and Japanese markets remain prone to sharp shifts.
"Japan could still be on the receiving end of new tariffs,” said Tim Waterer, chief market analyst at Kohle Capital Markets in Sydney. "This prospect may cap enthusiasm on Japanese markets, at least until we see which countries are next on Trump’s tariff ‘hit list’ and what tariff levels are applied.”
Trump’s talk of imposing reciprocal tariffs on "everyone” has also provided a stark reminder of the risks that face all of America’s trading partners, including Japan. Yet the amicable atmosphere of their first summit on Friday has the potential to help support Japanese stocks in the medium term, according to investors.
"There had been concerns that Trump may impose tariffs on Japanese cars,” said Daiju Aoki, regional chief investment officer at UBS SuMi Trust Wealth Management in Tokyo.
"There were no tariffs. In terms of the yen, they just confirmed that their finance chiefs would be in close touch. And there were no new demands on Japan’s defense spending. It will be a relief for markets.”
Japan’s 225-issue Nikkei Stock Average traded 0.1% down in early Monday trade, as a boost from the summit was offset by worries about rising U.S. inflation expectations and Trump’s comments that he will announce 25% tariffs on all imports of steel and aluminum.
The latter sent steelmaker shares down, with Nippon Steel falling as much as 2.6%.
Trump also said the Japanese steelmaker cannot own a majority stake in U.S. Steel after the leaders suggested they are working on an alternative plan for the Japanese company to make an investment that stops short of an outright purchase. The $14.1 billion bid for the iconic U.S. firm was blocked by the Biden administration.
With Trump seeking to eliminate his nation’s trade deficit with Japan, Ishiba agreed to buy more American liquefied natural gas (LNG), and revealed plans by Toyota and Isuzu Motors to invest more in the United States.
"The friendly tone and substance of the summit, especially in regard to Japan’s high profile investment in the U.S. steel sector, should provide a modest relief to Japanese investors,” said Homin Lee, senior macro strategist at Lombard Odier in Singapore, adding that the firm is "constructive” on Japanese stocks.
Currency analysts said the yen was likely to show a muted response as it didn’t become a focal point of the conversation, even though its weakness has been one of Trump’s long-held concerns regarding Japan.
A lack of verbal intervention from Trump saw the yen softening 0.2% to ¥151.76 per dollar, though it remained not far from a two-month high of ¥150.93 touched on Friday.
Mari Iwashita, executive economist at Daiwa Securities, said the yen could become a safe haven if markets perceive Trump’s stance on tariff against Japan as less severe than previously thought.
Buying more LNG from the U.S. and investing more there would eventually mean more demand from Japan to buy dollars, said Masayuki Koguchi, executive chief fund manager at Mitsubishi UFJ Asset Management.
Ishiba’s handling of his meeting with Trump has the potential to boost the popularity of the ruling Liberal Democratic Party, said Fumio Matsumoto, chief strategist at Okasan Securities.
At the margin, this may be positive for Japanese stocks ahead of an Upper House election later this year, given that concerns about political instability have weighed on the market since Ishiba lost an outright majority in the Lower House in an election last year.
To be sure, the relief following the Ishiba-Trump meeting hasn’t removed risks, and Japanese markets remain prone to sharp shifts.
"Japan could still be on the receiving end of new tariffs,” said Tim Waterer, chief market analyst at Kohle Capital Markets in Sydney. "This prospect may cap enthusiasm on Japanese markets, at least until we see which countries are next on Trump’s tariff ‘hit list’ and what tariff levels are applied.”
- 12/2 20:24
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