The Japanese stock market is on a strong upward trend! The easing of the China-US trade war is set to create the longest consecutive rise in the TOPIX index in 16 years.

After the world's two largest economies, China and the U.S., reached a trade consensus and agreed to significantly reduce tariffs on each other, global financial markets saw a significant increase in risk appetite, causing the Japanese Yen to weaken significantly as one of the safe-haven assets. The Japanese stock market continued to rise, with the benchmark stock index, the Nikkei 225, very likely to achieve its longest continuous uptrend in 16 years. Following high-level economic and trade talks between China and the U.S. in Geneva, a positive consensus was reached, announcing a significant reduction in bilateral tariff levels. The unexpected easing of tensions in China-U.S. trade relations has provided the clearest bullish signal yet for global investors, indicating that the Trump administration, which threatened to start a new global trade war just weeks ago by imposing radical tariffs, is now adopting a more moderate and rational approach. By the close of the U.S. stock market on Monday, the S&P 500 index surged by 3.3%, and the tech-heavy Nasdaq 100 index, often considered a guide for global tech stocks, re-entered a bull market trend. The benchmark index of the Japanese stock market rose by 1.9% in early trading in Tokyo to 2,794.96 points, heading towards a 13-day consecutive uptrend. If the Japanese stock market continues to rise by the close on Tuesday, it will mark the longest continuous uptrend since August 2009. The Nikkei 225 index, dominated by blue-chip stocks, also rose by 2.3% to 38,494.06 points. The latest increase in the Japanese stock market was fueled by the reduction of U.S. tariffs on Chinese goods from 145% to 30%, lasting for 90 days, while Beijing reduced tariffs on most U.S. imports to 10% thereafter. The two countries had held two days of high-level economic and trade negotiations in Switzerland. Since the announcement was made after the close of the Japanese stock market on Monday, it did not benefit from the strong boost brought by the China-U.S. trade agreement. Risk appetite in the market soared Overnight, the risk appetite was boosted by the temporary truce in China-U.S. trade tensions, weakening the demand for traditional safe-haven assets, leading to a more than 2% plunge in the USD/JPY exchange rate. In the U.S., tech stocks saw widespread gains, with the S&P 500 index soaring by over 3% by the close of Monday's U.S. stock market. On Tuesday, driven by the increase in risk appetite, Asian stocks surged collectively in early trading. Major U.S. tech giants such as Apple, Amazon, Nvidia, and Tesla (the so-called "Magnificent 7" with high weightings in the S&P and Nasdaq 100 indexes) suffered heavy losses during the recent sell-off of U.S. assets but witnessed significant gains after the positive consensus was reached at the China-U.S. trade level on Monday, leading the U.S. stock market higher. The Magnificent 7 index of U.S. tech giants closed up 5.35% on Monday, propelling the Nasdaq 100 index to rise by 4.02%, re-entering what is known as a "technical bull market." It is worth noting that after President Trump tweeted on April 9 that "now is a good time to buy stocks" (hours later, he suspended most of the planned tariffs), the S&P 500 index rebounded by over 16% for the rest of the month, marking the largest phase increase during Trump's two presidential terms (calculated based on a 21-day rolling basis, i.e., trading days between the two statements), excluding the rebound during the pandemic period. "The accumulated market risk aversion is rapidly dissipating, and the buying trend in the stock market appears to continue for some time," said Naoki Fujiwara, a senior fund manager at Shinkin Asset Management. "People are undoing the previous recession pricing trades," explained Mark Dowding, Chief Investment Officer of Fixed Income at BlueBay. "This is entirely understandable given the concern that we might experience some form of cliff-edge event with the sudden halt of China-U.S. trade, which constitutes a significant portion of global GDP. But now, this concern has significantly alleviated." Reduced tariffs between China and the U.S. pave the way for Japan-U.S. trade agreement Toyota and Nintendo, among other Japanese exporters, contributed the most to the gains in the Nikkei 225 index, and bank stocks also performed strongly. Export trade accounts for a large proportion of Japan's GDP makeup, and China and the U.S. are the largest export destinations for Japanese goods, so the easing of tensions in the China-U.S. trade war is expected to improve economic growth prospects, providing a boost to Japan's export economy. Companies like Yaskawa Electric and Fanuc, which have a high proportion of revenue from China, were among the top gainers in the Nikkei 225 index. Among the countries officially involved in the negotiations, Japan was one of the first to engage in trade talks with the U.S. government. Japanese investors are still awaiting a trade agreement between Japan and the U.S. It was reported by the Asahi Shimbun that Japanese Prime Minister Shizo Abe plans to formalize an agreement with the U.S. in July. Prior to the market opening on Monday, the Chinese Ministry of Commerce released a joint statement on the China-U.S. Geneva trade talks, stating that the U.S. would modify the tariff increase on Chinese goods (including those from Hong Kong Special Administrative Region and Macau Special Administrative Region) as specified in Executive Order No. 14257 of April 2, 2025. This includes suspending the implementation of 24% tariffs on these goods for the initial 90 days, while maintaining the remaining 10% tariffs as per the executive order; they also canceled the additional tariffs imposed on these goods under Executive Orders No. 14259 of April 8, 2025, and No. 14266 of April 9, 2025. According to assessments by several financial institutions, the latest trade consensus means that for the vast majority of goods, the U.S. tariffs on China have been reduced significantly from 145% to 30% (Fentanyl 20%+equivalent tariffs 10%) for this year. When taking into account the tariffs imposed by Trump in his first term (2018) on certain goods, the actual U.S. tariff rate on China is between 40% and 50%. "Was the past six weeks just a nightmare? The weekend Geneva consensus and the suspension of most China-U.S. tariffs suddenly make trade policy look more like the optimistic expectations of early April," said Cameron Crise, macro strategist at Bloomberg's Strategists. Kelvin Leung, portfolio manager at Robeco in Hong Kong, stated that the positive trade consensus between China and the U.S. paves the way for a Japan-U.S. trade agreement, benefiting Japanese exporters such as Toyota and Nintendo.The likelihood of a trade agreement has increased significantly.However, he added, "I am more concerned about the overly optimistic sentiment in the Japanese market. From the index level, it seems that market expectations are ahead." Since President Donald Trump announced the so-called global equal tariff policy on April 2nd, the Nikkei 225 index has risen more than 5% as of Monday, recovering all the tumultuous decline caused by the tariff policy during this period.