Tech Exemptions Ignite Japanese Market Rally Amid US Tariff Turmoil

The Japanese stock market surged last week as U.S. tariff exclusions for semiconductors, smartphones, and computers alleviated fears of a tech-sector meltdown. The Nikkei 225 index leaped 9.1% in a single session on April 11, its sharpest one-day gain in a decade, after President Trump’s administration confirmed exemptions for critical tech components under the Harmonized Tariff Schedule (HTSUS). The rally highlighted the outsized role of global supply chains in Japan’s economy—and underscored the fragility of investor confidence in an era of escalating trade wars.

The Tariff Exclusions: A Lifeline for Japan’s Tech Giants

The U.S. Customs and Border Protection (CBP) clarified on April 11 that imports of semiconductors, integrated circuits, and finished products like smartphones (HTSUS 8517.13.00) and flat-panel displays (HTSUS 8528.52.00) would be exempt from the 24%-84% reciprocal tariffs imposed under Executive Order 14257. This excluded roughly 20 HTSUS classifications, including those covering Apple iPhone components, Sony’s gaming consoles, and Advantest’s semiconductor testing equipment.

The exclusions targeted Japan’s export powerhouse: tech and automotive firms account for 40% of the Nikkei’s market cap. Tokyo Electron, a key supplier of semiconductor equipment, saw its shares surge 18% on the news, while Advantest jumped 15%. The broader Topix tech index rose 12%, outperforming all sectors.

Market Volatility: A Rollercoaster of Policy Uncertainty

Despite the tech-sector relief, Japan’s markets remain hostage to tariff swings. The Nikkei had tumbled 7.9% earlier in April amid fears of broader levies on Japanese imports, only to rebound sharply after the exemptions. This volatility reflects the precarious balance between U.S. protectionism and Japan’s export-dependent economy.

The CBP’s April 8 amendment—raising tariffs on Chinese goods to 84% while exempting U.S. allies—highlighted the policy’s uneven impact. While Japan’s tech firms breathed easier, its auto sector (25% tariffs remain in place) and smaller exporters faced lingering risks. Toyota’s shares rose 8% during the tech rebound but remain 15% below 2024 highs due to U.S. car tariffs.

Geopolitical Tensions and the Path Forward

The exclusions are a tactical win for Japan, but they mask deeper structural risks. Prime Minister Shigeru Ishiba’s April 13 meeting with Trump will focus on broader tariff relief, particularly for autos and machinery. Analysts warn that without a permanent deal, Japan’s economy—80% reliant on trade—could face a double-digit contraction if tariffs escalate.

Meanwhile, Taiwan’s tech giants like TSMC, which supplies 60% of global advanced chips, face their own U.S. tariff hurdles. A 104% levy on Chinese imports has already triggered circuit breakers in Taipei, with Foxconn’s shares plunging 12% on fears of disrupted supply chains.

Risks Remain: De Minimis and Diplomacy

The CBP’s April 8 rules also raised de minimis thresholds for low-value Chinese imports, imposing 90% tariffs on shipments over $150. This could squeeze Japanese retailers and e-commerce firms reliant on Chinese components.

Conclusion: A Fragile Rally, but Hope for Strategic Sectors

The Nikkei’s tech-driven rebound underscores the outsized influence of global supply chains on Japan’s equity markets. With U.S. exemptions covering $120 billion in Japanese tech exports, firms like Sony (up 10% since April 1) and Nikon (8%) are likely to outperform. However, the broader market’s stability hinges on diplomatic breakthroughs.

Investors should prioritize companies with diversified supply chains and minimal exposure to auto/steel tariffs. A reveals this divergence: tech stocks have gained 22%, while auto stocks remain flat.

While the April 11 rally was a welcome respite, Japan’s markets will remain on edge until trade tensions ease—a prospect that, as of April 2025, looks as fragile as ever.