In the unfolding drama of global trade tensions, Japan once again finds itself a target of US pressure. But unlike the 1980s, when the conflict centred on a rising US trade deficit fuelled by Japanese exports of cars and electronics, today’s stakes are far more complex.

Back then, the lines were clear and China remained largely outside the frame. Now, Japan finds itself caught precariously between two rivals, each demanding its loyalty.

Extreme volatility in Japanese equities in recent days has been driven by alternating waves of optimism and disappointment. A phone call between Prime Minister Shigeru Ishiba and US President Donald Trump on Monday sparked hopes of a breakthrough in tariff negotiations. And top US trade officials are preparing to launch formal negotiations with Japan, signalling a potential shift towards de-escalation in trade tensions. But a strengthening yen is weighing on exporter sentiment, tempering broader market enthusiasm and adding another layer of uncertainty to the outlook.