Has Trump’s Tariffs on Japanese Products Lowered the Stock Prices in Japan?

Abstract

The second Trump administration announced that it would impose reciprocal tariffs on many countries, including friendly ones, in April 2025. The unprecedented high tariff rates except for the first half of the 1900s came as a significant shock to countries all over the world because many economies, especially developed ones have been exploring the path to free trade through lowering tariffs or removing regulations by concluding trade agreements etc. Japan was no exception. This study analyzes the impact of Trump's tariffs on Japanese stock prices. For example, maintaining the status quo in Japan's policy interest rate amid a possible increase suggests a rise in stock prices. A cut in the US policy interest rate would mean a narrowing of the interest rate differential between Japan and the US (US interest rates are significantly higher than Japan's), which would lead to a fall in Japanese stock prices through a stronger Japanese currency, yen. Furthermore, President Trump's posts (SNS), in Japan's case, are generally thought to have had a negative effect on Japanese stock prices. The suggestion of a significant increase in tariff rates by the post is one example of this. This study examines factors that have both positive and negative effects on Japanese stocks and consider the causes of changes in Japanese stock prices. Meanwhile, this study analyzes macroeconomic variables that are thought to affect stock prices: exchange rates and interest rates. The results show that various statements, policy announcements, and posts by President Trump had no impact on Japanese stock prices in a short time; only the exchange rate affected them. Furthermore, exchange rate shocks only affected stock prices for a few days.