Japanese trade envoy Ryosei Akazawa has announced that the U.S. will change a presidential order related to tariffs and refund any extra duties collected. During talks in Washington with Commerce Secretary Howard Lutnick and Treasury Secretary Scott Bessent, Akazawa confirmed that both sides agree on the revised tariffs. In the updated deal, goods that were taxed above 15% will now have that rate capped. Goods previously taxed below 15% will now face a flat 15% duty, which includes current tariffs. Although Akazawa criticized the original order, he acknowledged U.S. officials’ regret and their promise to make timely corrections.

Amendment Implementation Timeline

A new order will implement the agreed tariff rates starting in July. This will reduce U.S. auto tariffs from 27.5% to 15%. With U.S. auto tariffs on Japanese cars nearly cut in half, from 27.5% to 15%, we can expect a boost in Japanese automaker stocks. Companies like Toyota and Honda will benefit, making call options on their stocks appealing in the coming weeks. This resolution eases a major uncertainty affecting the sector. The news should also help the Japanese yen, as a stronger export outlook will improve the country’s trade balance. The USD/JPY pair, which has fluctuated around 155 recently, may now experience downward pressure. Traders might consider shorting USD/JPY futures or buying call options on yen-tracking currency funds. This agreement lessens a crucial risk, likely leading to a drop in implied volatility for affected assets. Previously, implied volatility for major Japanese exporter stocks had increased over the past month as traders hedged against possible negativity. Selling puts or using credit spreads on these stocks could be a strategy to profit from falling volatility.

Market Implications and Outlook

In the broader market, this news is a clear positive for Japan’s Nikkei 225 index. A similar pattern was seen back in 2019 when easing trade tensions led to market relief and a rally. This creates a favorable environment for buying call options on Japanese market ETFs like EWJ. The impact is significant because the U.S. is a key market, accounting for over a third of total vehicle exports from major Japanese manufacturers, according to last year’s data. The refund of excess duties collected will also provide a direct cash boost for these companies, reinforcing a positive outlook on their near-term earnings potential. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now