On Sunday, the ruling coalition led by Japanese Prime Minister Mr Ishiba and the Liberal Democratic Party (LDP) lost its majority in the Upper House of Parliament. This marks the first time since 1955 that the LDP has failed to maintain control of at least one chamber.
Premier Ishiba’s days may well be numbered, having already lost control of the Lower House in elections just nine months ago. Momentum is also shifting towards opposition parties, which have pledged to cut taxes and tighten immigration policies. Intriguingly, the Sanseito party, a far-right populist group founded in 2020, has gained significant traction through YouTube, increasing its representation from one seat to fifteen.
Mr Ishiba is brushing off internal party pressure over his leadership, vowing to remain in office. He reaffirmed his commitment to overseeing tariff negotiations with the United States and tackling high inflation, a relatively new phenomenon for Japan who battled deflationary headwinds for most of this century.
Despite a rocky start to the week, sentiment in Japan improved on Tuesday following an announcement by US President Trump that he had signed the “largest trade deal in history” with Japan. Japan, the fifth-largest trading partner of the United States in goods, currently runs a trade surplus of approximately $70 billion. Key elements of the deal include Japan’s purchase of 100 Boeing aircraft and an increase in defence spending with US firms to $17 billion. The country’s automotive sector—which accounts for over a quarter of its exports to the US—will also benefit from a reduction in tariffs to 15%, sending shares in leading automakers Toyota and Honda up by 14% and 8% respectively over the week.
Continuing on the road of automakers, electric vehicle manufacturer Tesla reported a decline in both revenue and profits in its second-quarter earnings. Revenue fell short of market expectations, coming in at $22.50 billion compared to the forecasted $22.74 billion. Tesla shares have dropped nearly 20% year to date, with much of the volatility attributed to CEO Elon Musk’s four-month tenure as head of the Department of Government Efficiency (D.O.G.E), which ended in a public fallout with President Trump. The company is expected to face a few “rough quarters” ahead, following the withdrawal of US subsidies for electric vehicle manufacturers. However, Musk remains optimistic around future revenue streams, particularly from self-driving services anticipated to launch next year.
The European Central Bank (ECB) met on Thursday and, as expected, left interest rates unchanged at 2.15%. The ECB has diverged notably from other central banks in their rate-cutting cycles, making this pause timely, especially with inflation holding steady at 2% in June. ECB President Christine Lagarde expressed satisfaction with the outcome, stating that the Eurozone is in a “good place” and emphasised the importance of looking ahead. Her comments refer to the anticipated trade deal between the United States and the European Union, which negotiators hope to finalise before the 1st of August deadline.
After three years of negotiations, the UK and India have signed a free trade agreement, agreeing to cut tariffs on goods ranging from motor vehicles to whisky. The deal marks Britain’s largest trade agreement since leaving the EU in 2020—at least until the pending trade deal with the United States is signed and finalised. Aimed at boosting trade by £25 billion, the agreement has lifted sentiment, helping the UK large cap index reach a record close for the fourth consecutive day.
Silver prices continue to surge, reaching their highest level in nearly 14 years—just shy of the $40 per ounce mark. The metal previously hit a record high of $49 in 1980, a level it last approached in 2011.
Nathan Amaning, Investment Analyst
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