Nikkei hits eight-month low amid Trump tariff shock and yen strength
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Japan’s equity markets sold off sharply on Thursday, with the Nikkei 225 plunging to its lowest level since early August, as investors reacted to a broader-than-expected package of U.S. reciprocal tariffs targeting Japanese exports. President Donald Trump’s announcement of a 24% levy on Japanese goods, exceeding consensus expectations of 10% to 20%, triggered immediate risk aversion across Tokyo’s trading floors.
The Nikkei index initially dropped as much as 4.6% to a session low of 34,102.00 before recovering marginally to close down 2.8% at 34,735.93. The broader Topix index mirrored the decline, finishing 3.1% lower after losing 4.3% in early trade. Market participants described the policy shift as a “Trump tariff shock,” with Nomura Securities strategist Kazuo Kamitani noting a decisive pivot to risk-off sentiment.
Financial stocks were among the hardest hit, with the Topix Banks Index falling 7.2%. A steep drop in global bond yields weighed on net interest margins and rekindled speculation that the Bank of Japan may delay additional rate hikes. Resona Holdings posted the steepest individual loss within the financial sector, down 8.7% on the day.
Export-oriented sectors were also under pressure, compounded by a rally in the Japanese yen, which added to concerns over earnings compression. The automaker sub-index fell 4.5%, led by Toyota Motor’s 5.2% decline. The shipping sector saw similar downside, with Nippon Yusen shedding 5.6% after its president flagged concerns over reduced trans-Pacific cargo volumes in light of escalating trade barriers.
Some marginal relief came in the form of product exemptions. Pharmaceuticals and semiconductors were excluded from the reciprocal tariff list, as per a recent White House policy document. Drugmakers outperformed on the day, with the sector index posting gains. However, chip-related names such as Tokyo Electron and Advantest still closed in negative territory, albeit recovering from deeper intraday losses.
Japanese Prime Minister Shigeru Ishiba responded by stating that Tokyo would formally request the U.S. to reconsider its tariff stance. Nonetheless, analysts remain cautious. Oxford Economics’ Norihiro Yamaguchi warned that even if bilateral talks resume quickly, progress could be slow, particularly given U.S. criticism of Japan’s non-tariff trade practices, including VAT structures.
With elevated macro uncertainty and weak visibility on trade negotiations, Japanese equities appear unlikely to rebound meaningfully in the near term. The combination of higher input costs, currency headwinds, and deteriorating global demand continues to challenge the outlook for the export-driven economy.
The Nikkei index initially dropped as much as 4.6% to a session low of 34,102.00 before recovering marginally to close down 2.8% at 34,735.93. The broader Topix index mirrored the decline, finishing 3.1% lower after losing 4.3% in early trade. Market participants described the policy shift as a “Trump tariff shock,” with Nomura Securities strategist Kazuo Kamitani noting a decisive pivot to risk-off sentiment.
Financial stocks were among the hardest hit, with the Topix Banks Index falling 7.2%. A steep drop in global bond yields weighed on net interest margins and rekindled speculation that the Bank of Japan may delay additional rate hikes. Resona Holdings posted the steepest individual loss within the financial sector, down 8.7% on the day.
Export-oriented sectors were also under pressure, compounded by a rally in the Japanese yen, which added to concerns over earnings compression. The automaker sub-index fell 4.5%, led by Toyota Motor’s 5.2% decline. The shipping sector saw similar downside, with Nippon Yusen shedding 5.6% after its president flagged concerns over reduced trans-Pacific cargo volumes in light of escalating trade barriers.
Some marginal relief came in the form of product exemptions. Pharmaceuticals and semiconductors were excluded from the reciprocal tariff list, as per a recent White House policy document. Drugmakers outperformed on the day, with the sector index posting gains. However, chip-related names such as Tokyo Electron and Advantest still closed in negative territory, albeit recovering from deeper intraday losses.
Japanese Prime Minister Shigeru Ishiba responded by stating that Tokyo would formally request the U.S. to reconsider its tariff stance. Nonetheless, analysts remain cautious. Oxford Economics’ Norihiro Yamaguchi warned that even if bilateral talks resume quickly, progress could be slow, particularly given U.S. criticism of Japan’s non-tariff trade practices, including VAT structures.
With elevated macro uncertainty and weak visibility on trade negotiations, Japanese equities appear unlikely to rebound meaningfully in the near term. The combination of higher input costs, currency headwinds, and deteriorating global demand continues to challenge the outlook for the export-driven economy.