Japan's Stock Market Predicted for Profit Withdrawal
Japanese Stock Market Poised for Moderate Growth Amid Improving Trade and Earnings
The Japanese stock market is gearing up for moderate growth in the coming days, as positive developments in trade negotiations and corporate earnings bolster confidence. Key sectors such as automobiles, technology, and financials are expected to perform differently based on current trends.
The Nikkei stock average gained 6.64% as of early July 2025, thanks to partial US-China tariff agreements and strong corporate earnings. Although earlier in the year, the market faced downward pressure from rising interest rates and tariff concerns, these have somewhat eased, providing room for rebound.
One of the significant factors influencing this outlook is the US-Japan trade deal, which reduced auto tariffs from 27.5% to 15%. This move is expected to benefit auto manufacturers and their supply chains, accounting for about 20% of profits in Japanese-listed companies, and clarify the operating environment, supporting investment decisions, thus boosting the automobile sector.
The Bank of Japan (BoJ) is expected to be more likely to raise interest rates in the second half of 2025, possibly as early as September or October. This stance reflects confidence in stronger economic growth and could benefit financial stocks but may exert mixed effects on other sectors depending on sensitivity to borrowing costs.
The technology sector, especially the semiconductor industry, previously faced volatility due to rising interest rates and tariffs but is also poised for growth due to ongoing global demand and trade agreement easing. However, specific forecasts for technology were not detailed in the immediate reports.
The automotive sector shows mixed signals. Japanese automakers like Toyota and Honda have reported strong sales growth in electrified vehicles in the U.S., while others like Nissan, Subaru, and Mazda faced declines, partly due to inventory issues. The tariff reduction should help further stabilize and potentially improve the sector's near-term performance.
Inflation remains above the BoJ's 2% target, and the labor market is tight with wage growth accelerating. However, overall economic growth in Japan remains modest, suggesting that while growth prospects have improved, the market may still face headwinds from global trade tensions and internal economic challenges.
The Dow stumbles 316.38 points or 0.70 percent, while the NASDAQ gains 37.94 points or 0.18 percent and the S&P 500 rises 4.44 points or 0.07 percent. The strength on Wall Street comes from optimism that the U.S. could sign up more deals with its remaining trading partners before President Donald Trump's Aug. 1 deadline.
For the day, the Nikkei jumped 655.02 points or 1.59 percent. The Nikkei 225 is currently above the 41,825-point plateau. Crude oil rose on Thursday, with West Texas Intermediate crude for September up $0.87 or 1.33 percent to $66.12 per barrel.
Asian markets have a cautiously optimistic outlook on the improving outlook for trade deals. Japan will release July figures for Tokyo inflation later this morning. New home sales in the U.S. rebounded less than expected in June, as reported by the Commerce Department.
U.S. Secretary of the Treasury Scott Bessent stated that the talks are "going better than they had been," and progress is being made. Canada, India, South Korea, and the EU are ramping up their efforts in trade talks with the U.S. Japan's July figures for Tokyo inflation will be released later this morning.
- The technology sector, driven by the semiconductor industry, is expected to find growth opportunities due to global demand, the easing of trade agreements, and a promising outlook for trade deals, despite earlier volatility caused by rising interest rates and tariffs.
- In the financial landscape, the Bank of Japan's anticipated interest rate hike in the second half of 2025 could potentially benefit financial stocks, although the effects on other sectors may vary depending on their sensitivity to borrowing costs.
