EBC Markets Briefing | ​Nikkei defies mounting trade deal concerns

Japan's Nikkei opened higher on Tuesday though tensions between Washington and Beijing heated up. Treasury Secretary Scott Bessent said Trump would soon speak with President Xi to iron out a dispute over critical minerals.

The index will climb to 39,600 by end-year as uncertainties over US trade policies continue to clear up, although volatility is likely in the near term, according to equity strategists in a Reuters poll.

It was predicted to trade at 40,875 in mid-2026 and at 42,000 by the end of that year. Japanese stocks have swung wildly in the months since June, dropping as much as 27% into a bear market by the start of August.

The Japanese yen is now less of a safe-haven asset as the BOJ have kicked off QT to curb surging inflation. The currency has been trending higher this year, eroding the value of overeases earnings.

On top of that, US tariff on car imports is particularly worrying. Japan's car makers face a sharp fall in sales in one of their key markets, with Toyota executive warning on the impact on its business.

According to separate calculations by Nikkei, Japan's top seven car makers stand to lose almost 3.1 trillion yen in profits by March next year. Those companies altogether account for a great share of the Nikkei index.

It has fluctuated between 200 SMA for a while and there are few signs of breakout. As such, it could again break below 37,300 before bouncing back.

EBC Forex Market Analysis Disclaimer: This material is for general information purposes only and is not intended as (and should not be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by EBC Industry In-depth Analysis or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.

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