Global Markets Rally on U.S.–Japan Trade Agreement

Global equity markets rallied on July 23, 2025, after the United States and Japan announced a breakthrough trade agreement that significantly reduces tariffs on key exports. The deal, which includes cutting U.S. tariffs on Japanese auto imports from 25% to 15%, boosted investor sentiment and sparked optimism about broader progress on global trade.

Japan’s Nikkei 225 surged 3.5%, marking a one-year high, led by strong gains in the auto sector. Shares of Toyota jumped 14%, while Honda and Nissan gained 11% and 8%, respectively. The rally extended beyond automotive stocks, with the broader Topix index also climbing as investors priced in improved export prospects.

The positive momentum carried over to European markets. The Euro STOXX 600 rose 1%, and Germany’s DAX advanced as traders welcomed signs of easing trade tensions. U.S. equity futures also moved higher, reflecting renewed global risk appetite following the agreement.

In currency markets, the U.S. dollar slipped modestly against the Japanese yen, while Japanese government bond yields rose, signaling improving investor sentiment and reduced demand for safe-haven assets.

The agreement comes at a critical time, with markets on edge ahead of the August 1 deadline for proposed U.S. tariffs on European and Mexican goods. The U.S.–Japan deal has fueled speculation that similar breakthroughs could follow, particularly with negotiations between the U.S. and EU set to resume in Stockholm next week.

Commodity markets also responded positively. Brent crude halted its recent slide, supported by stronger risk-on sentiment and expectations of steady demand from Asia’s recovering industrial sector.

While geopolitical risks and macroeconomic uncertainties remain, the trade agreement between two of the world’s largest economies has offered a welcome boost to investor confidence. Market participants are now watching closely to see whether this momentum can extend to other regions and sectors in the coming weeks.