Japan’s Nikkei Stock Average Falls as Traders Lock in Gains after US Trade Deal Rally (UPDATE 1)

Reuters

12:15 JST, July 25, 2025 (updated at 17:30 JST)

TOKYO, July 25 (Reuters) – Japan’s Nikkei share average dropped on Friday, trimming a weekly advance that brought the index to the brink of a record, as traders locked in gains spurred by a newly inked trade deal with the United States.

The Nikkei 225 Index slid 0.9% to close at 41,456.23, trimming its five-day advance to 4.1%. The broader Topix, which hit an all-time high on Thursday, also dropped 0.9%.

The trade deal, announced late on Tuesday by U.S. President Donald Trump, reduced a reciprocal tariff on Japanese goods and autos-specific levies to 15% from the 25% Washington had threatened previously.

Shares of industrial robot maker Yaskawa Electric dropped 6%, paring a steep three-day advance. Mitsubishi Motors plunged 7.9% after the automaker reported an 84% drop in first-quarter operating profit.

The Nikkei’s 14-day relative strength index (RSI), a technical measure for an investment momentum, reached 77.8 on Thursday, the highest since the stock gauge hit its all-time high of 41,889.16 in July 2024.

Even value stocks are becoming pricey, putting increased focus on results for the April-June period to see if those levels are justified, said Tatsunori Kawai, chief strategist at Mitsubishi UFJ eSmart Securities.

“The Nikkei average had risen by about 2,100 yen in the past two days, so it seems like the market is taking a breather due to a sense of overheating,” Kawai said.

Traders may also be exhibiting caution ahead of central bank meetings in Japan, the U.S., and China next week, he added.

There were 54 advancers in the Nikkei index against 169 decliners.

The largest losers by percentage in the index were Shin-Etsu Chemical, down 9.5%, followed by Mitsubishi Motors.

The biggest gainers were Mitsui Mining and Smelting, up 3.5%, followed by chip industry supplier Disco, which rose 3.2%.