The US-Japan trade agreement has been signed by Trump, marking a new chapter in the economic ties between the two nations. Japan will increase its purchases of U.S. rice by 75%, creating more opportunities for American rice farmers. In response, the U.S. has implemented a 15% tariff on nearly all goods imported from Japan. This agreement aims to balance trade and make it easier for U.S. agricultural products to enter the Japanese market.

Investment Opportunities and Risks

Now that the US-Japan deal is signed, we need to look at potential challenges. The new 15% tariff on Japanese imports poses a significant obstacle for Japan’s export-driven economy, presenting clear short-selling opportunities. This makes puts on Japanese automaker stocks and Nikkei 225 index futures particularly appealing in the coming weeks. The currency market will see the most immediate action. We anticipate increased volatility in the USD/JPY exchange rate. The recent tariff announcement has driven the rate up to 152.50, a level we haven’t seen since the market chaos of late 2024. With the chance of future disagreements, a sudden drop is possible. Thus, using long volatility strategies like straddles would be wise to navigate the expected ups and downs. While the increase in U.S. rice purchases is beneficial for American agriculture, it is just a small part of the overall trade situation. Nevertheless, we are looking into call options on agricultural ETFs, as this sector stands to benefit directly. Past events, like the trade disputes of 2018-2019, have shown that specific sectors can disconnect from the broader market trends.

Market Volatility and Strategic Actions

The main takeaway is that this agreement brings more uncertainty than it solves. The VIX index, which measures expected market volatility, has already risen by 3%, now at 17.5 this morning. This indicates widespread concern over the stability of the deal. Therefore, it’s wise to invest in volatility rather than a specific market direction, as the likelihood of issues arising from the deal is high. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now