Japan trade deal, as it unfolded:

Bank of Japan Uchida:

Other:

The big news today was the announcement from Trump of a U.S.-Japan trade deal. His initial tweet was met with some scepticism—understandable, given his track record of misleading markets on trade—but confidence rose after Japan’s chief tariff negotiator, Ryosei Akazawa, confirmed the agreement via social media.

Details are still emerging (see posts above), but in brief:

  • 15% reciprocal tariffs

  • 15% auto tariffs (down from a proposed 25%)

  • Metal tariffs (e.g., steel and aluminium) remain at 50%

  • No specifics yet on upcoming semiconductor or electronics tariffs

  • Japan won’t cut tariffs or "sacrifice agriculture"

  • Rules will be adjusted to increase rice imports

  • Japan will invest $550 billion into the United States

The most immediate market impact was seen in Japanese equities. The Nikkei 225 surged more than 2.5%, hitting its highest level since 17 July 2024. Shares of Japanese automakers led the rally. However, U.S. automakers pushed back. The Detroit Three criticised the deal as favouring Japan, noting that while tariffs are cut on vehicles exported from Japan, the same does not apply to Japanese cars built in North America. U.S. automakers still face:

  • 50% steel tariffs

  • 50% aluminium tariffs

  • 50% copper tariffs

  • 25% tariffs on imports from Canada

  • 25% tariffs on imports from Mexico

Their grievances appear reasonable.

In Japanese political news, the Mainichi Shimbun reported that Prime Minister Shigeru Ishiba will step down by the end of August following his coalition’s defeat in the recent upper house election.

From the Bank of Japan, Deputy Governor Shinichi Uchida delivered a cautious economic outlook ahead of the BoJ’s 30–31 July policy meeting. Uchida flagged significant downside risks to growth and inflation due to “extremely high” global trade uncertainty. While the BoJ remains open to further rate hikes, any moves will depend on whether economic and price trends align with their projections.

Through it all, the yen saw choppy price action, trading in a wide 146.20–147.20 range. USD/JPY dipped (i.e., yen strengthened) on the initial trade headlines before bouncing back, dipping again, and bouncing again! As of this post, the pair is little changed from late U.S. session levels.

Elsewhere in FX, major currencies mostly traded in narrow ranges. The People’s Bank of China set USD/CNY at 7.1414—the strongest CNY fixing since 6 November last year.

Nikkei:

Nikkei 225 hourly wrap 23 July 2025 2
Source: Forex Live