Japan's TOPIX index rises 1.9% to 2,980.84 at morning close

Japan's TOPIX index rises 1.9% to 2,980.84 at morning close

Japan's TOPIX index surged 1.9% to 2,980.84 at the morning close on Monday, July 2, 2025. This increase follows a record high reached by the index on Thursday, July 1, when it hit 2,968.48. The rally was driven by the anticipation of a long-awaited trade deal between Japan and the United States, which was announced late on Tuesday by U.S. President Donald Trump.

The Nikkei share average also saw a significant gain, climbing to 41,740.71, its highest level since July 2024. The Topix transport equipment index gained 0.8%, adding to the previous session's nearly 11% surge. Banks led the gains, with the Topix banking index rising 3.6%, buoyed by bets that the additional economic clarity offered by the tariff deal will allow the Bank of Japan to resume interest rate hikes later this year [1].

The trade agreement announced by Trump reduced a baseline tariff rate and autos-specific levies to 15%, from the 25% duties previously threatened. This agreement has had a positive impact on Japanese car manufacturers, with shares of Toyota, Honda, Nissan, and other auto stocks soaring on Wednesday [2]. The Nikkei 225, driven by an 8.4% surge in the Tokyo Stock Exchange's transport equipment index, also jumped 2.5% to reach 40,731.86 as of 0121 GMT [2].

The stock market's latest push to all-time highs has been primarily driven by retail investors, according to recent data. Barclays estimates that retail traders have injected around $50 billion into global stocks in the last month alone, while JPMorgan predicts another $360 billion worth of stocks could be bought by retail investors through the end of 2025. This surge in retail trading has significantly contributed to the S&P 500's 26% climb since early April [3].

While institutional investors have shown a more cautious approach, retail traders have been more aggressive in their stock-buying activities. This shift in market dynamics highlights the growing influence of retail investors, who have become a significant force in shaping the stock market's trajectory.

The Bank of Japan is scheduled to meet on policy on Wednesday and Thursday of next week, with traders eyeing a potential rate hike in October. The odds for a rate hike are currently about a coin toss, reflecting the uncertainty surrounding the trade deal's long-term impact [1].

As the market continues to navigate through the earnings season, retail traders will remain a key factor to watch. The upcoming earnings reports from major companies like Alphabet and Tesla will provide further insights into the market's direction and the potential impact on retail investor sentiment.

References:
[1] https://www.tradingview.com/news/reuters.com,2025:newsml_L1N3TL00I:0-japan-s-topix-hits-record-high-in-trade-deal-afterglow/
[2] https://www.livemint.com/market/stock-market-news/toyota-honda-nissan-other-auto-stocks-rally-in-japanese-stock-market-as-nikkei-jumps-2-here-s-why-11753233355294.html
[3] https://www.ainvest.com/news/retail-traders-drive-stock-market-rally-time-highs-2507/