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Japan-US trade agreement reached, Japan's domestic response was mixed, and the financial market responded positively
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Hello everyone, today XM Foreign Exchange will bring you "[XM Foreign Exchange Official Website]: Japan-US trade agreement was reached, Japan's domestic response was mixed, and the financial market response was positive." Hope it will be helpful to you! The original content is as follows:
On July 23, 2025, US President Trump announced a major trade agreement with Japan, marking a breakthrough between the two sides after months of negotiations.
According to Trump's statement at TruthSocial, the United States will impose a 15% tariff on Japanese exports (less than the 25% threatened and 27.5% of existing automobile tariffs). Japan promises to invest $550 billion in the United States and open up markets for automobile, rice and other agricultural products in exchange for U.S. tariff reductions on Japanese goods. Trump celebrated the deal at the White House, calling it "the largest trade deal ever", stressing that it would narrow the U.S. $63 billion trade deficit and promote economic cooperation between the two countries.
In Japan, Prime Minister Shigeru Ishiba said he would "review the details of the agreement carefully" and emphasized that the agreement was "in line with national interests". Minister of Economic Revitalization Ryosei Akazawa posted on social platforms that "the mission was eouu.cnpleted", expressing his recognition of the negotiation results. Both parties positioned the agreement as a win-win situation, but did not disclose specific terms and details, such as whether the 50% tariff on steel and aluminum products is adjusted.
Domestic reactions in Japan
The responses to the agreement in Japan showed obvious differentiation. Media reports focus on the drop in automobile tariffs from 27.5% to 15%. Some media believe that it is a major benefit to automakers such as Toyota and Honda, but they are cautious about agricultural opening. Calling the agreement a "milestone in economic cooperation" emphasizes its positive role in export-oriented economy. However, Akira Banzai, head of the JA-Zenchu Central eouu.cnmittee, criticized that he said he was openThe rice market will cause a "destructive blow" to farmers and threaten Japanese agriculture.
Tokuko Shironitta, head of the Japanese leader of the Asian Group, warned that agricultural opening is a "political minefield" and may trigger protests in rural areas. Canon Global Institute KenjiMinemura believes that the agreement is a "strategic mistake" to sacrifice agricultural interests in exchange for auto tariff reductions. The Japan Economic Union welcomes the agreement, believing that the 15% tariff is an acceptable discount.
The agreement was reached as its political self-rescue attempt after the Liberal Democratic Party’s upper house election defeat (July 20), but strong opposition from agricultural groups may further weaken its support among rural voters. Shigeru Ishiba faces rumors of his resignation in August, and the controversy over the agreement may exacerbate his political dilemma.
Financial Market Performance
After the agreement was announced, the financial market responded positively, reflecting optimism about the easing of tariff uncertainty. In the Japanese stock market, the Nikkei index rose 3.5% as auto stocks pushed up, hitting a year-on-year high, Toyota soared 15% and Mazda rose 17%.
In the bond market, Japan's five-year government bond yield rose by 9 basis points to 1.11%, the highest since April. In the foreign exchange market, the US dollar/Japanese yen rose slightly by 0.2% around 146.9, which was limited by political uncertainty. In terms of global markets, European auto stocks (such as Volvo rose by more than 10%, BMW and Mercedes-Benz rose by 4-7%) rose by expectations of similar trade agreements.
MUFG's Derek Halpenny expects tariffs to stabilize at 10-15% in major economies, and the results of negotiations between the EU and China will keyly affect market sentiment.
Deutsche Bank analyst Jim Reid warned that high tariff threats in the EU (30%), Canada (35%) and Brazil (50%) may continue to push up volatility. ING predicts that other Asian exporters (such as South Korea) will accelerate negotiations by August 1, which will benefit global stock markets in the short term. AInvest recommends investors focus on eouu.cnpanies with localized production capacity to hedge supply chain risks.
Summary
The Japan-US trade agreement eased global trade uncertainty by reducing tariffs to 15% and promoting Japan's investment in the United States. Japan's domestic response was two poles: the auto industry and business eouu.cnmunity welcomed the agreement, while agricultural groups strongly opposed the opening of the rice market, worrying about falling prices and cultural shocks. Shigeru Ishiba tries to save his political status through a deal, but the agricultural dispute may exacerbate its plight.
The financial markets responded positively, with Nikkei and European auto stocks rising, and the US dollar/yen fluctuating slightly, but tariff pressures faced by the EU and China may continue to affect market sentiment. Investors need to pay attention to the EU negotiations on August 1 and the US-China tariff deadline on August 12 to assess the evolution of the global trade pattern.
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