Asian stock markets saw gains on Thursday, led by Tokyo, as optimism over ongoing trade negotiations between Japan and the United States helped offset concerns raised by Federal Reserve Chair Jerome Powell. Powell warned that President Donald Trump’s tariff policies could force the Federal Reserve to choose between combating inflation and addressing rising unemployment.
Investors are closely watching developments in Washington over the next three months as countries attempt to negotiate agreements to avoid severe tariffs announced by President Trump on April 2—referred to as “Liberation Day”—though those tariffs have been temporarily delayed for 90 days.
Given that Japanese companies are among the largest investors in the United States, the outcome of Tokyo’s negotiations holds significant importance for the markets. Some analysts have even likened Japan’s role to a “canary in the coal mine.” Traders were encouraged by early signs of progress in the discussions.
President Trump stated on social media that there had been “Big Progress!” in the talks, while Japan’s representative, Ryosei Akazawa, noted, “I understand that the US wants to make a deal within the 90 days. For our part, we want to do it as soon as possible.”
Although Japanese Prime Minister Shigeru Ishiba acknowledged that the negotiations would be challenging, he emphasized that President Trump had expressed a strong commitment to making the discussions a top priority.
Hopes that the harsh tariffs could be reduced have helped ease market fears following a sharp downturn earlier in the month, which had been driven by concerns over a potential global recession and the disruption of long-standing trade relationships.
There have also been reports suggesting that even countries targeted by the most severe tariff measures might be open to dialogue. Bloomberg reported that China is looking for preliminary steps before engaging in talks, such as curbing anti-Beijing rhetoric from some members of the US administration.
Stock markets in Tokyo, Hong Kong, Shanghai, Sydney, Singapore, Seoul, and Wellington all recorded gains, although Taipei experienced a slight decline.
Nevertheless, uncertainty continues to cloud investor sentiment following a Wall Street selloff and a new record high in gold prices, which surpassed $3,350. The volatility was fueled in part by Powell’s warning regarding the economic impact of tariffs.
Speaking to the Economic Club of Chicago, Powell explained that while the Federal Reserve’s goals for employment and inflation are currently balanced, future developments could create a difficult policy environment. “Tariffs are highly likely to generate at least a temporary rise in inflation,” he said, adding that the inflationary effects could persist longer than expected.
“You’ll probably see continued volatility,” he concluded.
Chris Weston of Pepperstone remarked, “Powell has again disappointed some investors who had hoped he might hint at potential interest rate cuts during the June policy meeting—a scenario currently being priced in by about 80 percent of interest rate swaps traders.”
Meanwhile, oil prices continued to rise after the US government imposed sanctions on a second Chinese refinery—Shandong Shengxing Chemical—for purchasing Iranian crude oil. The move is part of the Trump administration’s ongoing “maximum pressure” strategy aimed at reducing Iran’s oil exports to zero.
