Trump-Japan Deal Cheers Markets, But May Be Ephemeral

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Yet, this breakthrough comes amid political upheaval in Japan. Prime Minister Shigeru Ishiba's governing coalition has just lost control of the Upper House, marking the first time since 1955 that the ruling Liberal Democratic Party lacks a majority in either chamber.

Despite Ishiba's vow to stay on“to see this through,” internal pressure is mounting, with whispers that he may resign by late August. The timing raises a delicate question: is this deal a lifeline for Ishiba, or a political anchor weighing him down?

By lowering tariffs to 15% and landing a headline 90% profit allocation for the US, Trump has reshaped a looming trade war into something more akin to a managed retreat. It safeguards American manufacturing and investors while preserving Japan's access to critical export markets.

Global equity markets reacted well, not because tariffs vanished, but because certainty arrived. They may still shudder slightly at 15%, but at least there's clarity on when they'll fire. Japan's economic engines, automakers, especially, can now plan with confidence instead of fear.

Ishiba's weakened mandate complicates ratification of any deal. Without Upper House control, the LDP will face tussles within its own ranks. Should a backlash arise, especially over rice and farm exports, perhaps the most sensitive component, Tokyo could renege.

Even Ishiba's own standing might simmer into a career-defining crisis.

This deal proves tariffs aren't just economic weapons; they're tools of negotiation. The US wielded the threat of 25% duties to extract unprecedented investment pledges. It's a reminder: trade policy is foreign policy in disguise. When leverage is applied, balance sheets follow suit.

So is the Japan deal a template for the region? A 15% benchmark now exists not just for Tokyo, but for Seoul, Taipei and beyond. Also, with gas deals lined up with Europe reported on the table next, this may mark a new strategic scaffold under Trump's trade architecture.