Nikkei index ends at 11-month high on US economy optimism
The 225-issue Nikkei Stock Average ended up 336.60 points, or 0.84 percent, from Friday at 40,487.39, its highest level since July 17 last year. The broader Topix index finished 12.30 points, or 0.43 percent, higher at 2,852.84.
On the top-tier Prime Market, gainers were led by electric power and gas, information and communication, and mining issues.
The U.S. dollar weakened to the upper 143 yen range in Tokyo amid growing speculation that the U.S. Federal Reserve will cut interest rates early following recent dovish comments from some Fed officials, dealers said.
The Nikkei stock index briefly advanced more than 700 points following Wall Street gains late last week amid growing optimism that the world's largest economy would be lifted by U.S. monetary easing, brokers said.
Meanwhile, automaker shares fell after U.S. President Donald Trump said Sunday that he has no plans to roll back hefty auto tariffs imposed on Japan, clouding the outlook for ongoing bilateral tariff negotiations.
"Automakers have likely factored in the impact of higher tariffs on their earnings, but uncertainty over tariff talks on the key industry is weighing on such shares," said Maki Sawada, a strategist at the Investment Content Department of Nomura Securities Co.
Some export-oriented electronics issues were also sold due to a stronger yen, which reduces overseas profits of exporters when repatriated, while investors locked in gains after the Nikkei ended above the 40,000 threshold Friday for the first time since January.
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Japan Today
28 minutes ago
- Japan Today
Trump's tariffs could squeeze US factories and boost costs by up to 4.5%, a new analysis finds
FILE - President Donald Trump talks to workers as he tours U.S. Steel Corporation's Mon Valley Works-Irvin plant, Friday, May 30, 2025, in West Mifflin, Pa. (AP Photo/Julia Demaree Nikhinson, File) By JOSH BOAK and PAUL WISEMAN As President Donald Trump prepares to announce new tariff increases, the costs of his policies are starting to come into focus for a domestic manufacturing sector that depends on global supply chains, with a new analysis suggesting factory costs could increase by roughly 2% to 4.5%. 'There's going to be a cash squeeze for a lot of these firms,' said Chris Bangert-Drowns, the researcher at the Washington Center for Equitable Growth who conducted the analysis. Those seemingly small changes at factories with slim profit margins, Bangert-Drowns said, 'could lead to stagnation of wages, if not layoffs and closures of plants" if the costs are untenable. The analysis, released Tuesday, points to the challenges Trump might face in trying to sell his tariffs to the public as a broader political and economic win and not just as evidence his negotiating style gets other nations to back down. The success of Trump's policies ultimately depends on whether everyday Americans become wealthier and factory towns experience revivals, a goal outside economists say his Republican administration is unlikely to meet with tariffs. Trump has announced new frameworks with the European Union, Japan, the Philippines, Indonesia and Britain that would each raise the import taxes charged by the United States. He's prepared to levy tariffs against goods from dozens of other countries starting on Friday in the stated range of 15% to 50%. The U.S. stock market has shown relief the tariff rates aren't as high as Trump initially threatened in April and hope for a sense of stability going forward. Trump maintains the tariff revenues will whittle down the budget deficit and help whip up domestic factory jobs, all while playing down the risks of higher prices. 'We've wiped out inflation," Trump said last Friday before boarding Marine One while on his way to Scotland. But there's the possibility of backlash in the form of higher prices and slower growth once tariffs flow more fully through the world economy. A June survey by the Atlanta Federal Reserve suggested companies would on average pass half of their tariff costs onto U.S. consumers through higher prices. Labor Department data shows America lost 14,000 manufacturing jobs after Trump rolled out his April tariffs, putting a lot of pressure as to whether a rebound starts in the June employment report coming out Friday. The Washington Center for Equitable Growth analysis shows how Trump's devotion to tariffs carries potential economic and political costs for his agenda. In the swing states of Michigan and Wisconsin, more than 1 in 5 jobs are in the critical sectors of manufacturing, construction, mining and oil drilling and maintenance that have high exposures to his import taxes. The artificial intelligence sector Trump last week touted as the future of the economy is dependent on imports. More than 20% of the inputs for computer and electronics manufacturing are imported, so the tariffs could ultimately magnify a hefty multitrillion-dollar price tag for building out the technology in the U.S. The White House argues American businesses will access new markets because of the trade frameworks, saying companies will ultimately benefit as a result. 'The 'Made in USA' label is set to resume its global dominance under President Trump,' White House spokesman Kush Desai said. There are limits to the analysis. Trump's tariff rates have been a moving target, and the analysis looks only at additional costs, not how those costs will be absorbed among foreign producers, domestic manufacturers and consumers. Also, the legal basis of the tariffs as an 'emergency' act goes before a U.S. appeals court on Thursday. Treasury Secretary Scott Bessent said in an interview last week on Fox Business Network's 'Kudlow" show countries were essentially accepting the tariffs to maintain access to the U.S. market. 'Everyone is willing to pay a toll,' he said. But what Bessent didn't say is U.S. manufacturers are also paying much of that toll. 'We're getting squeezed from all sides,'' said Justin Johnson, president of Jordan Manufacturing Co. in Belding, Michigan, northeast of Grand Rapids. His grandfather founded the company in 1949. The company, which makes parts used by Amazon warehouses, auto companies and aerospace firms, has seen the price of a key raw material — steel coil — rise 5% to 10% this year. Trump has imposed 50% tariffs on imported steel and aluminum. Jordan Manufacturing doesn't buy foreign steel. But by crippling foreign competition, Trump's tariffs have allowed domestic U.S. steelmakers to hike prices. Johnson doesn't blame them. 'There's no red-blooded capitalist who isn't going to raise his prices'' under those circumstances, he said. The Trump White House insists inflation is not surfacing in the economy, issuing a report through the Council of Economic Advisers this month saying the price of imported goods fell between December of last year and this past May. 'These findings contradict claims that tariffs or tariff-fears would lead to an acceleration of inflation,' the report concludes. Ernie Tedeschi, director of economics at the Budget Lab at Yale University, said that the more accurate measure would be to compare the trends in import prices with themselves in the past and that the CEA's own numbers show 'import prices have accelerated in recent months.' The latest estimate from the Budget Lab at Yale is the tariffs would cause the average household to have $2,400 less than it would otherwise have. Josh Smith, founder and president of Montana Knife Co., called himself a Trump voter but said he sees the tariffs on foreign steel and other goods as threatening his business. For instance, Smith just ordered a $515,000 machine from Germany that grinds his knife blades to a sharp edge. Trump had imposed a 10% tax on products from the EU that is set to rise to 15% under the trade framework he announced Sunday. So Trump's tax on the machine comes to $77,250 — about enough for Smith to hire an entry-level worker. Smith would happily buy the bevel-grinding machines from an American supplier. But there aren't any. 'There's only two companies in the world that make them, and they're both in Germany,'' Smith said. Then there's imported steel, which Trump is taxing at 50%. Until this year, Montana Knife bought the powdered steel it needs from Crucible Industries in Syracuse, New York. But Crucible declared bankruptcy last December, and its assets were purchased by a Swedish firm, Erasteel, which moved production to Sweden. Smith beat the tariffs by buying a year's worth of the steel in advance. But starting in 2026, the specialty steel he'll be importing from Sweden is set to be hit with a 50% duty. 'The average American is not sitting in the position I am, looking at the numbers I am and making the decisions each day, like, 'Hey, we cannot hire those extra few people because we might have to pay this tariff on this steel or this tariff on this grinder,''' he said. 'I want to buy more equipment and hire more people. That's what I want to do.' © Copyright 2025 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed without permission.
Nikkei Asia
an hour ago
- Nikkei Asia
Union Pacific to buy Norfolk to create transcontinental US freight rail
(Reuters) -- Union Pacific said on Tuesday it would buy smaller rival Norfolk Southern in an $85 billion deal to create the first U.S. coast-to-coast freight rail operator and reshape the movement of goods from grains to autos across the country. If approved, the deal would be the largest-ever buyout in the sector and combine Union Pacific's stronghold in the western two-thirds of the U.S. with Norfolk's 19,500-mile (31,400-km) network that primarily spans 22 eastern states. The two railroads are expected to have a combined enterprise value of $250 billion and would unlock about $2.75 billion in annualized synergies, the companies said. Railroad operators since the robber baron days of the late 1800s Gilded Age have dreamed of linking the U.S. Atlantic and Pacific coasts by rail, and President Donald Trump's administration may be conducive to such a megadeal. "What I infer from the timing on this is they believe that the current political climate is going to be more favorable than it has been in recent history," said Mike Steenhoek, executive director of the Soy Transportation Coalition, which represents the U.S. soybean industry. The $320-per-share price implies a premium of 18.6% for Norfolk from its close on July 17, when reports of the merger first emerged. The companies said last Thursday that they were in advanced discussions for a possible merger. Talks between the two began in earnest in May, according to a source familiar with the matter. The deal will face lengthy regulatory scrutiny amid union concerns over potential rate increases, service disruptions and job losses. The 1996 merger of Union Pacific and Southern Pacific had temporarily led to severe congestion and delays across the Southwest. The deal reflects a shift in antitrust enforcement under Trump's administration. Executive orders aimed at removing barriers to consolidation have opened the door to mergers that were previously considered unlikely. Surface Transportation Board Chairman Patrick Fuchs, appointed by Trump in January to head the agency that oversees competition and other areas of economic importance in the rail industry, has advocated for faster preliminary reviews and a more flexible approach to merger conditions. The STB review process takes 16 months, per its statute, and the companies have said they are targeting a filing with the STB within six months, people familiar with the matter said. The companies said in the statement they expect the deal to close in early 2027. Major railroad unions have long opposed consolidation, arguing that such mergers threaten jobs and risk disrupting rail service. The transportation division of SMART, the International Association of Sheet Metal, Air, Rail and Transportation Workers, said it plans to oppose the merger when it comes before the STB for review. "We approach this development with measured skepticism rooted in the real-world impact such consolidation could have on rail workers, safety, service quality, and the long-term health of the freight rail industry," the largest U.S. union said in a statement on Tuesday. The union's SMART TD transport division is North America's largest railroad-operating union, with more than 1,800 railroad yardmasters. The North American rail industry has been grappling with volatile freight volumes, rising labor and fuel costs, and growing pressure from shippers over service reliability, factors that could further complicate the merger. Union Pacific's and Norfolk's shares were down about 3% each. The proposed deal had also prompted competitors BNSF, owned by Berkshire Hathaway, and CSX to explore merger options, people familiar with the matter said. While Berkshire's enormous cash reserves could allow BNSF to challenge Union Pacific for Norfolk Southern, this was unlikely, investment bankers said, citing both its Chairman Warren Buffett's distaste for hostile acquisitions and a cash bid would not allow Norfolk Southern shareholders to benefit from future value creation. Union Pacific is paying around 70% of the Norfolk Southern purchase price in stock, the statement said. The Union Pacific merger would give the company a 43% market share, dominating most categories of commodities, according to Jason Miller, interim chair of the department of supply chain management at Michigan State University's business college. "I can't help but think this would create pressure for BNSF Railway and CSX to explore a merger possibility." Agents at the STB are already conducting preparatory work, anticipating they could soon receive not just one, but two megamerger proposals, a person close to the discussions told Reuters on Thursday. If both mergers are approved, the number of Class I railroads in North America would shrink to four from six, consolidating major freight routes and boosting pricing power for the industry. The Brotherhood of Railroad Signalmen raised concerns over safety, transparency, and employee treatment after the deal announcement, saying it would push for safeguards as regulators review the deal. The last major deal in the industry was the $31 billion merger of Canadian Pacific and Kansas City Southern that created the first and only single-line rail network connecting Canada, the U.S. and Mexico. That deal, finalized in 2023, faced heavy regulatory resistance over fears it would curb competition, cut jobs and disrupt service, but was ultimately approved. Morgan Stanley and Wells Fargo advised Union Pacific, and Bank of America served as exclusive financial adviser to Norfolk Southern.
Japan Today
2 hours ago
- Japan Today
A raw deal but the best they could get with Trump: Europe dismayed and relieved at the same time
By DAVID McHUGH, THOMAS ADAMSON, JUSTIN SPIKE and NICOLE WINFIELD President Donald Trump and European Commission President Ursula von der Leyen shake hands after reaching a trade deal at the Trump Turnberry golf course in Turnberry, Scotland Sunday, July 27, 2025. (AP Photo/Jacquelyn Martin) The European Union's trade agreement with the Trump administration is getting mixed reviews. EU officials say they warded off a total economic disaster. But French officials in particular say the EU punched below its weight while economists say the deal is dangerously vague. The deal leaves Europe with a 15% tariff on most goods imported into the U.S., with some goods categories tariff-free but no agreement on rates for key areas such as pharmaceuticals and steel. Here is what they're saying: Failing to reach a deal by the Aug. 1 deadline would have meant a 30% tariff threatened by Trump, said Maroš Šefčovič, the EU's chief trade negotiator. The chief aim of European officials was a negotiated deal, rather than a tit-for-tat escalation that could have included retaliatory EU tariffs on 93 billion euros ($108 billion) worth of goods including US agricultural goods, steel and chemicals. 'A trade war may seem appealing to some, but it comes with serious consequences, with at least a 30% tariff," said Šefčovič. 'Our transatlantic trade would effectively come to a halt, putting close to 5 million of jobs, including those in SMEs (small and medium sized enterprises) in Europe, at grave risk. "Our businesses have sent us a unanimous message: avoid escalation and work towards a solution that delivers immediate relief.' Senior French officials on Monday criticized the accord, with Foreign Trade Minister Laurent Saint-Martin urging a European response in the services sector, and Strategy Commissioner Clément Beaune warning it underplayed the bloc's economic strength. 'The good news is that there is an agreement — our companies now have visibility and stability in the transatlantic trade relationship,' said Saint-Martin on France Inter radio. 'But this agreement is not balanced, and we will need to keep working." He pointed to digital services as a key front in the trade imbalance. 'Donald Trump spent months saying he wanted to rebalance a trade relationship that disadvantages the United States, but he was only talking about goods. If we look at services, it's the opposite. So it's up to us now to carry out the work of force and rebalancing,' he said. 'The United States decided to use force to impose a new law of the jungle that no longer respects the rules of international trade that we had for decades,' Saint-Martin added. Beaune, France's High Commissioner for Strategy and Planning, said on franceinfo radio: 'This is an unequal and unbalanced agreement.' He warned: 'Europe did not wield its strength. We are the world's leading trading power.' 'When you look at it, the glass is a quarter full and three-quarters empty,' Beaune said. Prime Minister François Bayrou was even more scathing, posting on X: 'It is a dark day when an alliance of free peoples, united to uphold their values and defend their interests, resigns itself to submission.' German Chancellor Friedrich Merz said the deal would give companies a more predictable environment to plan and invest — a key EU goal after weeks of back-and-forth threats in tense talks with Trump administration officials. 'It is good that Europe and the U.S.A. have agreed and thus avoided an unnecessary escalation in transatlantic trade relations' he said. "We have been able to preserve our core interests, even if I would have very much wished for further relief in transatlantic trade.' Asked about negative reactions to the deal from German business, Merz countered that it was met with relief by some companies and sectors. However, 'it is completely clear to me that the tariffs that now remain — in particular the 15% against 0% for imports to the European Union — constitute a significant burden for the export-oriented economy of the Federal Republic of Germany,' Merz said, noting that he had said repeatedly ahead of the agreement that 'there will be an asymmetric deal if there is one at all.' Italian Premier Giorgia Meloni, who has positioned herself as a 'bridge' between the Trump administration and Europe, welcomed news of the tariff agreement as a 'positive' outcome that avoided an 'unpredictable and potentially devastating' trade war. But in comments to reporters on the sidelines of a U.N. food security conference in Addis Ababa, Ethiopia she said details still needed to be worked out and that she still is unclear what exemptions are carved out for particular industries. 'I always thought, I continue to think that a trade escalation between Europe and the United States would have unpredictable, potentially devastating consequences,' she said. She said she needed to understand what the exemptions might be, including on agricultural products which are of concern to Italy, given its wine exports in particular. 'So there are a number of elements that are missing as well as I don't know exactly what we are referring to when we talk about investments, gas purchases." She noted that the deal in its current form is legally non-binding in principle, 'so there is still, let's say, room to fight.' Hungarian Prime Minister Viktor Orbán, an ally of President Donald Trump who has gained a following within the MAGA movement, blasted the agreement on Monday as a failure on the part of Europe's leadership. 'Even at first glance, it is obvious to me that this is not an agreement,' Orbán said in a video discussion with his party's spokesman. 'Donald Trump ate (European Commission President) Ursula von der Leyen for breakfast, that's what happened.' Orbán, a frequent critic of the European Union, has been careful not to criticize Trump's administration for its trade policy, instead faulting the EU for being unable to conclude a comprehensive tariff agreement with Washington. Orbán said a trade deal between the US and the UK which imposed a blanket 10% tariff on UK exports, was more favorable than that concluded with the EU. 'The American president is a heavyweight negotiator, and (von der Leyen) is a featherweight,' Orbán said. 'The European agreement is worse than the British one, so portraying it as a success will be difficult.' Jon Harrison at TS Lombard: 'It is no surprise to find that trade deals agreed under duress in weeks rather than the usual years of careful negotiation leave a mass of detail incomplete and open to interpretation.' Jack Allen-Reynolds, deputy chief eurozone economist at Capital Economics: 'We think this will reduce EU GDP by about 0.5%, which is worse than we had previously assumed.' 'While the deal has avoided a much worse outcome for now, it remains to be seen whether it will last.' Julian Hinz, trade expert at the Kiel Institute for the World Economy: 'The deal agreed yesterday is not a good deal — it is appeasement. "While the EU may avert a trade war in the short term, it is paying a high price in the long term by abandoning the principles of the multilateral, rules-based world trade system of the World Trade Organization." © Copyright 2025 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed without permission.
