Japanese Stock Market Drops 39,000 Yen... Trump Auto Tariff Imposition 'Negative Factor'

Nikkei Average Falls for First Time in Three Days
Trump's Morning Remarks on Auto Tariffs Shock Market
Intraday Decline Exceeds 200 Yen at One Point

On the 19th, the Nikkei average stock price closed lower for the first time in three trading days. During the session, the decline widened, dropping to as low as 39,000 yen. Investor sentiment weakened after former U.S. President Donald Trump announced that additional tariffs on imported automobiles would be set at around 25%.

On that day, the Nikkei average closed at 39,164.61 yen on the Tokyo Stock Exchange, down 105.79 yen (0.27%) from the previous trading day. It briefly rose riding the upward trend of U.S. semiconductor stocks but turned downward, with the intraday decline exceeding 200 yen at one point, falling to 38,994.70 yen.

Concerns were raised about the negative impact on corporate earnings, especially in the automobile industry, which has a large export share to the U.S., following former President Donald Trump's announcement of approximately 25% additional tariffs on imported cars. Selling pressure also intensified in the stock market.

Looking at individual stocks, automobile companies were hit hard. Toyota Motor and Honda Motor shares temporarily fell more than 1%. Mazda Motor and Mitsubishi Motors, which have low local production ratios in the U.S., dropped nearly 2% at one point.

However, Nihon Keizai Shimbun (Nikkei) assessed that the current market reaction might be a temporary shock. Mitsunari Akino, CEO of Ichiyoshi Asset Management, also stated, "Trump prioritizes U.S. economic growth, so he is unlikely to implement excessive tariff policies that could cause inflation within the U.S." In fact, Trump declared a 25% tariff on imports from Mexico and Canada but postponed its implementation for a month on the 4th, just before it was to take effect.

If tariffs, contrary to market expectations that they are a 'negotiation tactic,' are actually imposed by President Trump on automobiles, the impact is expected to be significant. Market forecasts suggest Toyota's operating profit could decrease by about 20%, while Honda and Mitsubishi could see declines of around 40%. Takahide Kiuchi, an economist at Nomura Securities, estimated that imposing a 25% tariff on automobiles could reduce Japan's gross domestic product (GDP) by 0.2% over the next two years.

Kensho Kamoshita, head of equity investment at PGIM Japan, analyzed, "Item-specific tariffs like the automobile tariffs currently under discussion are highly likely to be implemented because this method makes it easier to predict the economic and inflationary impacts compared to reciprocal tariffs."