Insights 
VT 
Key Points:
- Nikkei 225 fell 0.4% to below 39,700 while Topix declined 0.6% to 2,810
- New 25% U.S. tariff on Japanese goods could cut Japan’s GDP by 0.8% in 2025
The Nikkei 225 slipped 0.4%, closing at 39,581.65, with a session low of 39,544.65. The broader Topix index followed suit, losing 0.6% to 2,810, as markets digested the fallout from President Trump’s 25% tariff announcement on Japanese imports
This marked a stark reversal from Wednesday’s recovery, with traders rattled by the firm August 1 deadline and no possibility of an extension. The high of 39,951.65 on Thursday failed to hold, as momentum crumbled sharply in the late Tokyo session.
Tariffs Threaten Japan’s Growth Forecast
The newly announced duties are expected to shave 0.8% off Japan’s GDP in 2025, according to a local economic think tank. Cumulatively, this could translate to a 1.9% drag by 2029—a serious blow to an already fragile recovery.
Japan’s Prime Minister Shigeru Ishiba described the tariff escalation as “truly regrettable,” though he reaffirmed Tokyo’s commitment to continued dialogue. Despite that, traders are beginning to price in the damage of a prolonged trade disruption.
Technical Analysis
The Nikkei 225 fell sharply in the latest session, breaking below multiple intraday support zones and closing at 39,581.65, marking a 0.76% drop. After hitting resistance at 40,027.65, price action has been dominated by lower highs and lower lows.
Picture: Nikkei 225 tumbles below 39,600 as risk-off mood takes hold, as seen on the VT Markets app
The current structure shows strong bearish momentum, with the MACD histogram deep in negative territory and the signal line crossover widening. The 5- and 10-period MAs are both sharply sloped downwards, while the 30-MA remains above price, reinforcing the downside bias.
A key short-term support now lies at 39,540–39,580, the current area of consolidation and former bounce zone. A confirmed break below 39,540 could accelerate declines toward 39,300, with further downside risk toward 39,000.
Any rebound attempt must first overcome resistance at 39,800, where the 10‑ and 30‑MA cluster offers a likely ceiling. A breakout back above 39,950 would be needed to shift the bias back to neutral.
