TOKYO – Japan’s Nikkei share average eked out a small gain on Monday, navigating a choppy session influenced by stronger-than-expected economic data and looming U.S. tariff threats on imported vehicles.

The Nikkei 225 index closed up 0.1% at 39,174.25, fluctuating between positive and negative territory throughout the day. The broader Topix index also saw a modest increase of 0.3%, reaching 2,766.9.

Financial stocks were a bright spot, driven by positive GDP figures. Japan’s economy expanded at an annualized rate of 2.8% in the October-December quarter, exceeding market expectations. This growth reinforces the Bank of Japan’s (BOJ) current trajectory of interest rate hikes and policy normalization. Banks, sensitive to interest rate changes, saw gains, with Sumitomo Mitsui Financial Group and Mitsubishi UFJ Financial Group both rising by approximately 2%. The positive GDP data also pushed shorter-term Japanese government bond yields higher.

However, the threat of U.S. tariffs on imported cars cast a shadow over the market, particularly impacting automakers. U.S. President [omitted name] stated on Friday that tariffs on automobiles would be implemented as early as April 2nd, but provided few details. This vague announcement created uncertainty among investors. “There are a lot of uncertainties…, leaving just a vague impression that tariffs will be increased,” commented Kazuo Kamitani, an equities strategist at Nomura Securities. Toyota Motor fell 1.1%, leading a decline in the auto sector, which was among the worst-performing on the Tokyo Stock Exchange, shedding 1.3%.

Wall Street's mixed performance on Friday offered little clear direction for Japanese stocks. While AI chip maker Nvidia boosted the Nasdaq, the Dow and S&P 500 both declined. U.S. markets were closed on Monday for the Presidents' Day holiday.

Within Japan's heavyweight stocks, Advantest, a chip-testing equipment manufacturer with Nvidia as a client, rose 1.3%, while SoftBank, an investor in AI-focused startups, added 1.8%, providing the largest lift to the Nikkei. Meanwhile, Tokyo Electron, a peer of Advantest, stumbled 1.1%, and Sony Group rallied 4.1%.

Bridgestone, a tire maker, saw a surge of nearly 6% after announcing a plan to buy back up to 11% of its shares.

The Japanese market is currently balancing the positive momentum from domestic economic growth against the potential risks posed by international trade tensions. Investors are closely monitoring developments regarding the proposed U.S. tariffs and their potential impact on the Japanese auto industry.

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