A Trump administration official announced that Japan will buy more U.S. agricultural products, especially rice. The U.S.-Japan agreement does not change tariffs, except for a 15% tariff that the U.S. has placed on Japanese cars and auto parts. This announcement follows Trump’s claims of achieving a “massive deal” with Japan. He mentioned that this deal is very different from previous agreements. Japanese representative Akazawa expressed confidence, stating “Mission Complete.”

Nikkei Index Reaches Peak

After the announcement, Japan’s stock market soared, with the Nikkei index hitting its highest level since July 17, 2024. At the same time, the Japanese yen experienced fluctuations and has weakened slightly against the U.S. dollar. We anticipate that Japan’s increased agricultural purchases will directly help U.S. farmers. In 2023, Japan was already a top-five market for U.S. farm products, importing over $15 billion. Any increase in purchases will likely raise prices. Traders should consider buying call options on agricultural ETFs focusing on corn, soybeans, and rice futures. The 15% tariff on cars and parts is a significant setback for Japan’s key export industry. North America accounts for more than 30% of total vehicle sales for major companies like Toyota, impacting their profit margins. This situation presents an opportunity to invest in put options on the largest Japanese automobile manufacturers listed on U.S. exchanges.

Yen’s Currency Movement

The initial rise in the Nikkei reflects relief that a deal is finalized, but we see this as a possible “sell the news” scenario. The auto industry is a major component of the index, and ongoing tariffs may pull the market down after the initial excitement fades. For context, similar targeted tariffs during the 2018-2019 U.S.-China trade war led to considerable declines in affected Chinese stock indexes. A weaker yen, which has recently dropped past 158 to the dollar, helps Japanese exporters by increasing the value of their overseas earnings. Akazawa’s remark suggests that Japan might accept this currency weakness as a necessary support for its economy. We expect this trend to continue, making trades that profit from a rising USD/JPY appealing. Create your live VT Markets account and start trading now.

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