Nikkei remains near 8-month low as traders brace for U.S. tariff shock
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Japan’s equity markets remained under pressure on Tuesday, with the Nikkei 225 index closing near an eight-month low as investors positioned cautiously ahead of a fresh wave of U.S. tariffs. The index ended the session virtually unchanged at 35,624.48, erasing earlier gains amid concerns over a strengthening yen and its impact on export-driven sectors.
The broader Topix index managed a modest increase of 0.1% to close at 2,661.73. However, both benchmarks are reflecting growing strain from the deteriorating trade landscape. The Nikkei had already logged a 10.7% loss in the first quarter—its worst quarterly performance since the pandemic-induced collapse in Q1 2020. In contrast, the Topix recorded a smaller 4.5% quarterly decline.
Investor sentiment remains subdued as U.S. President Donald Trump prepares to unveil an expansive tariff package, expected to target imports from key trading partners, including Japan. The anticipated protectionist measures have intensified concerns around the outlook for Japanese exporters. Meanwhile, the yen has appreciated approximately 4.3% year-to-date, benefiting from a global flight to safety but simultaneously adding pressure to Japanese equities by eroding exporters’ profit margins. On Tuesday, the yen edged slightly higher to 149.84 per U.S. dollar.
Technology shares, particularly within the semiconductor supply chain, were among the weakest performers. Advantest, a leading chip-testing equipment maker, fell 2.9%, while cable manufacturer Fujikura lost 3.1%. Alps Alpine, a key player in electronic components, recorded the steepest drop among Nikkei constituents, declining 5%.
The cautious tone was further underscored by economic data released earlier in the session. The Bank of Japan’s closely watched tankan survey indicated a headline business confidence index for large manufacturers at +12 in March, matching market expectations. While the result was neutral on the surface, analysts noted it could leave the door open for a potential interest rate hike by the BOJ, indirectly supporting the yen and adding further weight on equities.
Heading into the second quarter, market participants will closely monitor the details of the impending U.S. tariff announcement, the yen's trajectory, and policy signals from the Bank of Japan. These factors will be crucial in shaping investor sentiment and the near-term direction of Japanese equities.
The broader Topix index managed a modest increase of 0.1% to close at 2,661.73. However, both benchmarks are reflecting growing strain from the deteriorating trade landscape. The Nikkei had already logged a 10.7% loss in the first quarter—its worst quarterly performance since the pandemic-induced collapse in Q1 2020. In contrast, the Topix recorded a smaller 4.5% quarterly decline.
Investor sentiment remains subdued as U.S. President Donald Trump prepares to unveil an expansive tariff package, expected to target imports from key trading partners, including Japan. The anticipated protectionist measures have intensified concerns around the outlook for Japanese exporters. Meanwhile, the yen has appreciated approximately 4.3% year-to-date, benefiting from a global flight to safety but simultaneously adding pressure to Japanese equities by eroding exporters’ profit margins. On Tuesday, the yen edged slightly higher to 149.84 per U.S. dollar.
Technology shares, particularly within the semiconductor supply chain, were among the weakest performers. Advantest, a leading chip-testing equipment maker, fell 2.9%, while cable manufacturer Fujikura lost 3.1%. Alps Alpine, a key player in electronic components, recorded the steepest drop among Nikkei constituents, declining 5%.
The cautious tone was further underscored by economic data released earlier in the session. The Bank of Japan’s closely watched tankan survey indicated a headline business confidence index for large manufacturers at +12 in March, matching market expectations. While the result was neutral on the surface, analysts noted it could leave the door open for a potential interest rate hike by the BOJ, indirectly supporting the yen and adding further weight on equities.
Heading into the second quarter, market participants will closely monitor the details of the impending U.S. tariff announcement, the yen's trajectory, and policy signals from the Bank of Japan. These factors will be crucial in shaping investor sentiment and the near-term direction of Japanese equities.