NIKKEI225 Sheds Over 2% on Auto Tariffs & Incoming Bond Tapering
Auto imports hit with 25% tariffs sends car makers lower, while concerns rise for BoJ’s reduction in bond buying.
- Toyota & Honda slump
- NIKKEI225 suffers trade tariffs
- BoJ adds to bearish sentiment
The NIKKEI225 lost 2.52% overnight as trade tariffs on autos are set to come into effect next week. BoJ bond tapering adds to negative sentiment for stocks.
Auto Tariffs Lead NIKKEI225 Lower
Trade tariffs of 25% on auto imports to US take their toll on the NIKKEI225, with automakers taking a hit.
Toyota shares are down 4.53% and Honda shares are down 4.88% this morning. Automakers could mitigate these levies by moving some production to the US.
Both companies have production plants in Mexico and Canada, in the meantime, it’s likely that the tariffs will result in price hikes.
Politicians and automaker associations around the globe have been denouncing what they see as a threat to free trade.
However, it seems that they often forget that US goods are currently subject to higher tariffs on their exports.
NIKKEI225 Live Chart
BoJ to Extend Bond Tapering Program
The central bank will announce its new bond buying program for Q2 on Monday. Analysts are expecting the bank to reduce the buying amounts in long-term bonds, 10-to-25-year maturities.
Up until now, the quantitative tightening program focused on reducing shorter maturities, mainly 10-year bonds.
The BoJ currently owns around half of government bond issuance and unwinding its balance sheet is part of policy normalization.
However, the extent of reducing its bond holdings may push bond yield high enough to make NIKKEI225 stocks less attractive at current levels.
What remains to be seen is whether the economy can expand fast enough to offset higher interest rates and yields for fixed income assets.
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