Tokyo led a rally in Asian markets on Thursday, as hopes for a breakthrough in Japan-US trade talks helped offset concerns sparked by Federal Reserve Chair Jerome Powell’s stark warning about the economic risks of President Donald Trump’s aggressive tariff strategy.
Markets across the region breathed a little easier after signs emerged that trade negotiations between Tokyo and Washington were gaining traction. With Japanese companies among the largest investors in the United States, investors view these talks as a bellwether — or as one trader put it, “the canary in the coal mine.”
On social media, Trump stoked market optimism by announcing “Big Progress!” in the talks, while Japan’s envoy Ryosei Akazawa confirmed Washington’s intent to strike a deal within 90 days.
“For our part, we want to do it as soon as possible,” Akazawa said, echoing Prime Minister Shigeru Ishiba’s sentiment that while the path ahead wouldn’t be easy, the US president had made the talks a “top priority.”
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This renewed diplomatic momentum follows Trump’s dramatic unveiling of a new wave of tariffs on what he dubbed “Liberation Day,” April 2. However, he delayed their implementation for 90 days — effectively setting the clock ticking for key trade partners to renegotiate terms.
The mere possibility of easing trade tensions has offered some relief to markets, which were rattled earlier this month by fears of a global recession and disruption to long-standing trade frameworks.
There’s also speculation that China — the target of some of Trump’s harshest measures — could be signaling a willingness to negotiate, though reportedly it wants preliminary concessions, such as a more restrained tone from certain US officials.
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Thursday saw a wave of green across major Asian indices: stocks in Tokyo, Hong Kong, Shanghai, Sydney, Singapore, Seoul, and Wellington all advanced. Taipei was the lone laggard, posting a slight dip.
Still, uncertainty lingers. Wall Street’s recent selloff and surging gold prices — with bullion breaching $3,350 per ounce — reflect the underlying tension in markets.
Jerome Powell didn’t help soothe nerves either. In a speech to the Economic Club of Chicago, he acknowledged that while inflation and employment goals are currently balanced, escalating tariffs could force the Federal Reserve into a difficult position.
“Tariffs are highly likely to generate at least a temporary rise in inflation,” Powell said, adding that these effects “could also be more persistent.” He warned that the Fed may face a “challenging scenario,” and cautioned investors to brace for more market volatility.
Market analyst Chris Weston of Pepperstone noted that Powell’s remarks disappointed traders who were hoping for hints of a potential rate cut at the Fed’s upcoming June meeting — expectations that had been priced in at around 80% by interest rate swaps traders.
Meanwhile, oil prices ticked higher following new US sanctions on a Chinese refinery. The move, part of Washington’s ongoing “maximum pressure” campaign against Iran, targeted Shandong Shengxing Chemical for allegedly purchasing Iranian crude in defiance of US sanctions. The State Department reiterated its aim of reducing Iran’s oil exports to zero.
As the world’s two largest economies jockey for position on trade and geopolitics, investors remain on edge — watching for signals of progress, or further turbulence, in a delicate global balancing act.
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AFP
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