Asian stock markets mostly rose on Tuesday, driven by optimism over potential US trade deals and expectations of Federal Reserve interest rate cuts, though Japan’s Nikkei fell sharply after former US president Donald Trump threatened new tariffs on Japanese rice and automobile imports.
Markets in Shanghai, Sydney, Singapore, Seoul, and Taipei posted gains following record highs on Wall Street, where the S&P 500 and Nasdaq closed at all-time peaks on Monday. Investor sentiment was lifted by comments from Trump’s economic team suggesting multiple trade deals were nearing completion, and by Canada’s decision to cancel its digital tax targeting US tech firms, paving the way for resumed trade talks.
However, Tokyo’s Nikkei dropped 1 percent to 40,081.61, reversing recent gains after Trump posted on Truth Social accusing Japan of refusing US rice exports despite facing a domestic rice shortage. He threatened to send a formal letter and implied maintaining the 25 percent tariff on Japanese automobiles, citing unfair trade imbalances. The comments added pressure on Prime Minister Shigeru Ishiba, who is already facing criticism over doubling rice prices ahead of elections this month.
Nomura Asset Management’s Hideyuki Ishiguro warned that a collapse in US-Japan trade talks could damage investor confidence in Japanese equities. The Nikkei was further pressured by a stronger yen as the dollar weakened to its lowest level since February 2022 on expectations of upcoming US rate cuts. Investors anticipate the Federal Reserve could reduce rates at least twice this year, a move that also buoyed gold prices by over 1 percent to above $3,300 per ounce, enhancing its appeal as a safe haven asset.
Meanwhile, the US Senate continues to debate Trump’s “Big Beautiful Bill,” which seeks to extend tax cuts and reduce entitlement spending but could add over $3 trillion to the national deficit. Trump has urged lawmakers to pass the bill before July 4.
In currency markets, the euro edged up to $1.1795, the pound rose slightly to $1.3740, and the dollar fell against the yen to 143.63. Oil prices slipped, with West Texas Intermediate down 0.4 percent to $64.88 per barrel and Brent crude down 0.3 percent to $66.54 per barrel.
While most Asian markets remain buoyant on hopes of finalized US trade deals and lower US borrowing costs, Japan faces renewed trade tensions that threaten its equity outlook amid domestic economic pressures.
