Investor optimism surged in Tokyo this week as Japan’s equity markets extended a remarkable rally, fuelled by a breakthrough in US-China trade negotiations. The Nikkei 225 rose 0.4% to 37,644.26, while the broader Topix index climbed 0.3% to 2,742.08, marking its 12th consecutive daily gain—the longest winning streak since 2017.
This momentum follows a significant development over the weekend: the United States and China agreed to a 90-day suspension of recent tariff hikes after productive talks in Geneva. Under the agreement, the US will reduce tariffs on Chinese goods from up to 145% to 30%, while China will lower its tariffs on US goods from 125% to 10%.
The de-escalation of trade tensions has invigorated global markets, with investors anticipating increased trade flows and reduced recession risks. In Japan, sectors heavily reliant on exports, such as semiconductors, brokerages, and shipping, led the gains . The positive sentiment is further bolstered by Japan’s expanding current account surplus, despite a widening goods deficit, indicating resilience in the nation’s economic fundamentals.
However, not all sectors shared in the optimism. Japanese pharmaceutical stocks faced headwinds following US President Donald Trump’s announcement to reduce prescription drug prices by 30%-80%, aligning them with costs in other developed nations. Major Japanese pharmaceutical firms experienced significant share declines, reflecting concerns over potential revenue impacts.
Despite these sector-specific challenges, the broader market outlook remains positive. The establishment of a mechanism for ongoing dialogue between the US and China suggests a commitment to resolving trade disputes, providing a more stable environment for international trade and investment.
Fidelity Japan Trust PLC (LON:FJV) aims to be the primary investment choice for those seeking exposure to Japanese companies. The Trust employs a ‘growth at a reasonable price’ (GARP) investment style and approach, which involves identifying companies whose growth prospects are being undervalued or are not fully acknowledged by other investors.
