Global financial markets experienced a broad surge, with Japan's Nikkei 225 index climbing as much as 800 points. Gold and silver prices also saw significant gains.
On February 18, Japanese stocks rallied sharply. The market upswing followed the announcement of a new trade initiative with the United States. Under the agreement, Japan plans to invest up to $36 billion in U.S. projects focused on oil, natural gas, and critical minerals. This investment represents the first part of a broader $550 billion commitment.
Former President Donald Trump announced the deal on social media, stating, "Our massive trade deal with Japan has just begun! The scale of these projects is so large that they would not be possible without a very special word—'TARIFFS'."
Japanese Prime Minister Sanae Takaichi commented that the initiative aims to build resilient supply chains by collaborating in areas critical to economic security, including key minerals, energy, and artificial intelligence. She noted that the project aligns with the core goals of promoting mutual benefits, ensuring economic security, and fostering economic growth between the two nations.
According to a statement from U.S. Secretary of Commerce, the largest investment will be in a natural gas facility in Ohio, expected to generate 9.2 gigawatts of power. Trump referred to the project as "the largest in history." A U.S. Commerce Department briefing indicated that Japan is expected to invest up to $33 billion in the facility, led by a subsidiary of SoftBank Group. Japan's Ministry of Economy, Trade and Industry also listed SoftBank as a participating company.
Japan's Minister of Trade stated that companies such as Toshiba and Hitachi have expressed interest in participating. At full capacity, the facility's power output would be equivalent to nine nuclear reactors, sufficient to supply approximately 7.4 million households.
A second project involves a $2.1 billion deepwater crude oil export facility in the Gulf of Mexico, to be operated by Sentinel Midstream. It is projected to handle up to $30 billion in annual U.S. crude exports.
Japan will also invest $600 million in an industrial diamond manufacturing plant in Georgia. These diamonds are essential inputs for semiconductors, automotive, and energy industries.
In addition to the surge in Japanese equities, futures for the three major U.S. indices and the FTSE China A50 also saw short-term gains.
Gold and silver prices rebounded strongly on the 18th, recovering after a more than 3% decline over the previous two sessions driven by a stronger U.S. dollar.
Several financial institutions, including BNP Paribas, Deutsche Bank, and Goldman Sachs, predict that gold will resume its upward trend. Supporting factors include heightened geopolitical tensions, capital outflows from sovereign bonds and currencies, and concerns over the Federal Reserve's independence.
In the short term, investors are monitoring comments from Fed officials and the release of the January meeting minutes for clues on U.S. monetary policy. During the January meeting, policymakers chose to keep interest rates steady. Expectations of future rate cuts are seen as supportive for non-yielding precious metals. A recent mild inflation report reinforced the case for lower borrowing costs, briefly boosting gold prices last week.
Federal Reserve Governor Michael Barr said on Tuesday that interest rates should remain steady "for some time" until there is more evidence that inflation is moving toward the central bank's 2% target. Meanwhile, Chicago Fed President Austan Goolsbee suggested that further rate cuts this year are possible if inflation continues to decline.