Japanese stocks fell as wild swings on Wall Street sapped investor confidence ahead of the full implementation of US trade tariffs.
The broader Topix Index slid as much as 3.7% to 2,342.66 points, while the blue-chip Nikkei 225 Stock Average declined as much as 4% to 31,708.21.
Shares of exporters were down after the yen surged more than 1% against the US dollar overnight and continued its climb on Wednesday.
US President Donald Trump spent the final hours before his tariffs were set for implementation lining up negotiations with US allies, but his insistence on pushing forward with sweeping 104% tariffs on many Chinese goods dimmed optimism that a brutal trade war would be avoided.
The S&P 500 closed down 1.6%, leaving it on the brink of a bear market.
“If the US enters a recession, earnings of Japanese companies will deteriorate even more than from the impact of tariffs,” said Mitsushige Akino, president of Ichiyoshi Asset Management.
See also: Japan’s Nikkei 225 enters bear market while PM Ishiba seeks tariff deal
It is quite possible the US will raise the yen’s level in order to reduce the trade deficit, but the stock market has not priced in the risk of a further strengthening of the currency, Akino added.
The volatility of global markets weighed on sentiment despite hopes that Japan might strike a trade deal with the US to reduce or avert a 24% levy. Both the Topix and the Nikkei 225 jumped about 6% on Tuesday in their biggest gains since August 2024, after a call between Prime Minister Shigeru Ishiba and Trump spurred optimism of a last-minute deal.
See also: Japan’s stocks slide as global growth outlook darkens on tariffs
“For Japan, the implementation of the 24% tariff is the darkest aspect and from there it will become a matter of how to reduce it,” said Hideyuki Suzuki, a general manager at SBI Securities.
Shares also declined after China’s equity benchmarks opened lower. The nation has vowed to “fight to the end” in response to the latest tariffs, calling the escalation “a mistake on top of a mistake”.
Chart: Bloomberg
