The U.S. plans to implement a 15% tariff on all imports from Japan, according to a White House source. This new tariff will apply to all products, with no exceptions for those already facing higher tariffs. Initially, it was believed that only items with tariffs below 15% would be impacted. However, the new tariffs will affect every Japanese import, adding an extra 15% charge.

Market Response

This announcement came just after U.S. markets closed, causing some fluctuations. Notably, the yen dropped initially but later stabilized after news about the tariff increase broke. Earlier in the week, there were hints of these changes. Akazawa mentioned that the trade agreement between the U.S. and Japan isn’t legally binding. By Tuesday, Akazawa had not confirmed the agreement on tariffs and was preparing to return to the U.S. for further discussions. As a result of these events, the Japanese yen is under pressure. Due to the yen’s decline, traders are considering derivatives that could profit, such as buying USD/JPY call options. The tariff news is seen as a negative signal for the yen. We anticipate this downward pressure will persist as the market adjusts to the potential impact on Japan’s economy.

Currency and Stock Market Impact

As of August 7th, 2025, the USD/JPY pair has climbed over the 162 mark, the highest since late 2024. This move has broken through key resistance levels, suggesting more upward movement in the near future. The primary strategy is to remain long on the U.S. dollar against the yen. This isn’t just about currency; it represents a major challenge for Japanese stocks. We are considering buying put options on the Nikkei 225 index, as major exporters will likely suffer due to the 15% tariff. A recent survey revealed that over 30% of Japanese manufacturing exports go to the U.S., highlighting the possible damage. We’ve seen similar scenarios during the 2018-2019 trade disputes. Initial tariff threats led to months of volatility and a weakening of the target currency. History suggests that this uncertainty will not resolve quickly, creating an environment ripe for volatility-based trades. This situation arises at a particularly poor time, as Japan’s latest Q2 2025 GDP growth forecast was downgraded to just 0.3% due to weak consumer spending. With limited options available to counter this external shock, the yen’s path appears downward. This underlying weakness reinforces a bearish outlook for the coming weeks. Given the political nature of these announcements, we should prepare for sharp price fluctuations based on headlines and official statements. This makes buying options strategies like straddles on USD/JPY appealing, as they can profit from significant movements in either direction. The only certainty is that market volatility will rise significantly from here. Create your live VT Markets account and start trading now.

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