Tariff clarity, earnings lift Tokyo stocksーNHK WORLD-JAPAN NEWS
Japan has confirmed US tariffs on its goods will be imposed at a baseline rate of 15%. Car export exports will be subject to the same rate. Uh to explain why that’s a big deal, we bring in Yuko Fushima as always from our business desk. Uh so Yuko, things were unclear when we last talked about this on Thursday, right? Yes, they were unclear, Raja. And that’s a major problem for businesses and investors, but the fog over that tariff rate has lifted. Now, Japan’s trade negotiator says the US has agreed to amend an executive order on import tariffs, a revision that will correctly reflect what the two sides agreed to in recent trade talks. The US tariffs came into effect just after 100 p.m. on Thursday, Japan time. The two sides had agreed to a baseline US tariff of 15% on most Japanese goods. However, this levy is being imposed on top of existing tariffs, which is not what Tokyo agreed to. Japanese economic revitalization minister Akazawa Jose says this contradiction has been sorted out. He met US commerce secretary Howard Lutnik and Treasury Secretary Scott Bessant overnight. He says he requested urgent revisions to the tariff executive order signed by President Donald Trump on July 31st. According to Ankazawa, his US counterparts expressed regret over the handling of the issue. The US side said they will revise the executive order in a timely manner. The US also explained that a revised executive order will allow for retroactive repayment of tariffs that have been paid above the agreed level since the day the tariffs took effect. Akazawa says he also confirmed the US will lower its levies on Japanese autos to the agreed 15%. And that will be made official in another executive order. Uh so I had a peek at Japanese stocks today and uh Yuko investors must have been happy about something that tariff news right seems. So now the news on those revisions triggered the surge in Japan’s benchmark stock indexes uh on Friday. Now, the Nikk225 ended the day at 41,820, up 1.8% from Thursday’s close. The broader topics also rose up 1.2%. That was a fresh record, exceeding the 3,000 mark for the first time. Investors snapped up export related shares early in the session. The bet here is that the adjustments in Washington will bring US tariffs into line with expectations of Japanese officials. But prices retreated in the afternoon as traders locked in profits. Now the focus in the Tokyo market is switching to how US negotiations with China and other trading partners will play out. And now time for an expert take. I talked to Matsumoto Fumio. He’s a chief strategist at Okasan Securities about today’s market surge. Now he confirmed that tariff clarity was a big reason investors piled into stocks. But he says company earnings were also driving up share prices. Many major Japanese companies had reported their earnings results by August 7th. Before the financial reports came out, analysts were expecting ordinary profit losses of about 16%. But now, as of Thursday, we see losses running at only 6.6%. So investors were relieved that earnings were not that bad. In addition, traders in the morning heard trade negotiator Akazawa clarify the status of the tariff negotiations with the US. So these were the factors that pushed up stock prices on Friday. So Yugo, it wasn’t just tariffs pumping the Tokyo market. Uh so tell us more about these corporate earnings reports. Sure. Now many companies on the Tokyo stock exchange has been reporting earnings. Now so far about 880 have released data from for the April to June quarter. Now that’s about half of the major companies included in topics. A broader index of firms listed on the Tokyo market. According to Okasan Securities for the three months ended in June, these firms recorded a combined operating loss of 3.3% at an ordinary profit loss of 6.6%. Explaining this loss, Matsumoto pointed to the dollar yen exchange rate. I’m sure companies were affected by tariffs. In addition to that, in the April to June quarter, the dollar against the Japanese currency was trading at about 145 yen on average. Compared to the same period the year before, the dollar weakened about 11 yen. This change in the foreign exchange rate pushed down profits at export companies and also weighed on profits overall. So, uh, now that we know exactly how much the US tariff rate will be, um, Yugo, what’s the outlook for corporate Japan? Yes. And you mentioned clarity and that is crucial because executives can now be more confident in their planning for the future. Now, here’s Matsumoto again. Now that the exact tariff rate is known, it will be easier for many companies to make decisions compared to the April to June period. That includes plans for their pricing strategy or where to move their factories. For example, would it be better to expand their plants overseas or keep operating in Japan? Tariffs will continue to have an impact in the July to September period and onwards. So, the negative effects will not go away. But I don’t think it will hit companies too badly if they move to cut costs and release new product models with value added features and higher price tags. In two to three years, there’s a good chance that companies will be able to absorb losses from the tariffs. Right? Listening to that, it does seem there is hope Japanese companies can weather the tariff storm after all. Right? But you know, clarity on tariffs is just the first step. There’s big shift happening in global trade and many companies need to come up with new strategy to survive this changing environment.
A confirmed tariff rate of 15% for Japan’s exports to the US, including autos, wasn’t the only reason shares jumped. Earnings reports also offer hope that companies can weather the trade storm. #business #tariffs #japan #usa
More stories on business and technology: https://www3.nhk.or.jp/nhkworld/en/news/tags/60/
Please subscribe HERE: http://www.youtube.com/channel/UCSPEjw8F2nQDtmUKPFNF7_A?sub_confirmation=1