Japan’s Nikkei Stock Logs Worst Day in 4 Months on US Tariff Worries; Automakers Slump (UPDATE 2)

Reuters

10:15 JST, February 3, 2025 (updated at 16:15 JST)

TOKYO (Reuters) – Japan’s Nikkei fell more than 2% on Monday in its worst session in four months as concerns over the global economy mounted after U.S. President Donald Trump levied tariffs on Canada, Mexico and China, with automakers leading the decline.

The Nikkei slipped 2.66% to 38,520.09, its lowest close since Jan. 17. The index also posted its biggest daily percentage drop since Sept. 30. The broader Topix fell 2.45% to 2,720.39.

Trump imposed 25% tariffs on Canadian and Mexican imports and 10% on goods from China starting Feb. 4. Canada and Mexico immediately vowed retaliatory measures, and China said it would challenge Trump’s levies at the World Trade Organization.

“Japanese stocks fell amid uncertainties about the global economic outlook, which includes worries that Japanese exports may be a target of Trump’s tariff policy in the future,” said Kentaro Hayashi, senior strategist at Daiwa Securities.

“Also, if prices rise in the U.S. and the dollar strengthens, yields will rise. That may affect Japan’s monetary policy.”

Automakers slumped, with Toyota Motor losing 5% to drag the Topix the most. Honda Motor fell 7.2% and Nissan Motor lost 5.63%, with strategists saying their auto production in Mexico is bigger than their Japanese peers.

In contrast, Suzuki Motor, which is not present in the United States, posted a marginal loss of 0.05%.

“If automakers face higher tariffs, they would have to raise prices and their competitiveness might be hurt,” said Fumio Matsumoto, chief strategist at Okasan Securities.

Mexican operations of Japanese automakers are largely dependent on U.S. demand and that is a big factor for them, said Tomo Kinoshita, global market strategist at Invesco Asset Management in Japan.

One but all of the Tokyo Stock Exchange’s 33 industry sub-indexes fell, with automaker shedding 5% to become the worst performer.

The Nikkei volatility index rose 20% to its highest level since mid-December.

Shares of video game developer Konami Group jumped 14% to become the biggest support for the Nikkei.