Japanese stock markets surged on Tuesday morning, with the Topix index rising as much as 1.9%, marking a 13th consecutive day of gains, a feat not seen since August 2009. The Nikkei 225 also rallied, up 2.3% to 38,494.06, driven by optimism following a temporary truce in US-China trade tensions.

This latest rally positions the Topix for its longest winning streak in 16 years, amid renewed confidence in global trade stability and equity markets.

US-China Trade Truce Sparks Global Rally

The market momentum comes after Washington and Beijing announced mutual tariff rollbacks following two days of high-stakes negotiations in Switzerland. The US reduced tariffs on Chinese goods from 145% to 30% for a 90-day period, while China lowered its duties to 10% on most American imports.

The announcement came after Japanese markets closed on Monday, providing a boost to Tuesday’s open.

Yen Weakens Sharply on Risk Appetite Surge

Following the trade truce, the Japanese yen dropped more than 2% overnight against the US dollar, reflecting waning demand for traditional safe-haven assets like the yen. This currency depreciation benefits Japan’s export-heavy companies, as a weaker yen makes Japanese products more competitively priced overseas.

Exporters and Tech Giants Fuel Gains

Among the biggest gainers were Toyota Motor Corp. and Nintendo Co., who stand to benefit from improved global trade and a weaker yen. Industrial and robotics giants such as Yaskawa Electric Corp. and Fanuc Corp., who derive significant revenues from China, also ranked among the top-performing stocks on the Nikkei 225.

Banks and financial institutions also rallied, in response to the stronger economic outlook and increased investor risk appetite.

Market Sentiment Turns Positive

Naoki Fujiwara, senior fund manager at Shinkin Asset Management, commented, “The risk-off sentiment that had built up is easing, and it looks like the buying trend will continue for a while longer.” This reflects a broader market consensus that the worst fears over prolonged trade hostilities are temporarily abating, creating breathing room for equity markets globally.

Investors Eye Japan-US Trade Deal Next

As the dust settles on the US-China front, attention now turns to Japan-US trade relations. Japan was among the first countries to formally enter trade discussions with the US, and Prime Minister Shigeru Ishiba aims to finalize an agreement by July, according to a report by the Asahi newspaper.

This development raises investor expectations that Japan could soon secure better trade terms with its largest non-Asian trading partner.

Caution Amid Optimism

Despite the bullish momentum, some analysts urge caution. Kelvin Leung, portfolio manager at Robeco Hong Kong, noted, “I’m more worried about the fast optimism in Japan. Judging by the index level, expectations are running ahead of fundamentals.”

There are concerns that the market could overextend, especially if global negotiations falter or macroeconomic headwinds return.

Broader Context: Tech and Wall Street Rally

The US stock market saw a major rally, with big tech stocks soaring and the S&P 500 gaining over 3%. This added to the positive sentiment across Asian markets, with investors betting on further gains in equities, particularly in export-driven and tech-heavy economies like Japan.

Reciprocal Tariff Moves Signal De-escalation

The tariff adjustments mark the most significant easing in trade tensions between the US and China in years. Though temporary, these measures are seen as a gesture of goodwill and a step toward longer-term solutions in global trade disputes that have rattled markets since 2018.

Nikkei’s Strong Momentum Since April

The Nikkei 225 has gained more than 5% since early April, when former US President Donald Trump announced reciprocal tariffs, stirring global trade uncertainty. Since then, Japanese equities have outperformed most Asian peers, driven by resilient corporate earnings and improved foreign inflows.

Conclusion: Bullish But Watchful

The current uptrend in Japanese equities, led by the Topix and Nikkei 225, is backed by a powerful combination of global trade optimism, yen depreciation, and export strength. However, investors are advised to remain vigilant, as geopolitical risks, inflation, and premature optimism could temper the rally in the coming months.

For now, Japan enjoys a rare moment of market leadership in Asia, with the potential to attract more global capital if trade stability persists.

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