Market Rundown: Japan’s PM loses majority, but markets expected worse | REUTERS
Japan’s government has lost its majority, but investors think it could have been worse. It’s Monday, 21st of July, and here’s what you need to know. Japan’s ruling coalition has lost its majority in the country’s upper house, but the prime minister says he will stay on. The government looks shaky, but Asian markets were fairly calm this Monday morning because investors had already priced in bad news. Japan has less than two weeks to strike a trade deal with the US before a 1st of August deadline, and there are fears weak exports could push it into recession. Sales of Japanese cars to the US have already plummeted after they were hit with a 25% tariff. Our chart of the day is the yen against the dollar that sunk fairly steeply in recent months, but it is holding its ground this Monday. The Bank of Japan is still expected to hike rates further, but investors aren’t now pricing that in until the end of October. Political instability will make things harder for the central bank. The market, though, had been expecting an even worse result for the government. You may have missed that China issued its first quotas for rare earths production for this year. That would be easy to miss since the decision was delayed and then made without the usual public statement. That shows China is tightening its control on rare earths, and that matters especially for car makers that rely on the elements. Some European car makers had to partly shut factories last month after China clamped down on supply. European and Chinese officials are set to talk rare earths at an EU China summit in Beijing this week, but the Europeans aren’t very confident of a deal. Our number of the day is €2.3 billion. That’s how much car maker Stalantis expects to have lost in the first half of the year. A lot of that is down to US tariffs, which hit foreign cars with a 25% duty. Stalantis estimates the direct cost of tariffs at 300 million euros. Like other European car makers, it suspended its results earlier in the year. The US Commerce Secretary Howard Lutnik said at the weekend he is confident of making a trade deal with the EU before the 1st of August. But that doesn’t mean there will be relief for car makers. And that’s what you need to know this morning.
The Japanese Prime Minister lost his majority in the upper house election, but Asian markets remained fairly calm, as they had already priced in a worse result for the government. Elena Casas explains how political instability will complicate the picture for the Bank of Japan
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