While Prime Minister Shinzo Abe and U.S. President Donald Trump neared an agreement on a U.S.-Japan trade deal over the weekend, it wasn’t enough to quell market anxiety over the U.S.-China trade war Monday, when key Tokyo stock indexes plummeted and the yen at one point rose to its highest level against the dollar this year.

The 225-issue Nikkei average, which plunged more than 500 points at one point, ended down 449.87 points, or 2.17 percent, at 20,261.04 on Monday. The Topix, which covers all first-section issues on the Tokyo Stock Exchange, dropped 24.22 points to 1,478.03.

The yen, seen as safe in times of volatility, sharply appreciated, even breaking the ¥105 threshold to hit ¥104.50 against the dollar early Monday morning. The currency was trading at ¥105.73 against the dollar as of 5 p.m. in Tokyo trading.

Analysts cautioned that markets are reeling and said there are no bullish factors that could reverse the trend immediately.

“It all comes down to what the U.S. and China will say and how they say it,” said Chihiro Ota, a general manager of investment research at SMBC Nikko Securities Inc. “For this week, as far as the trend, the tide is ebbing. This can’t be reversed.”

At the same time, Ota said Trump may say something “market friendly” that could boost stock prices.

Yusuke Miyairi, an economist at Nomura Securities Co., identified the U.S.-China trade row, weak Chinese currency and a global manufacturing slowdown as three factors promoting the strong yen against the dollar.

Besides the intensifying trade war, Miyairi said China setting a benchmark below 7.2 yuan per dollar and a key U.S. manufacturing index indicating contraction have caused a flight to safety in currency markets.

Tokyo endured the rough trading day as world leaders assembled in Biarritz, France, for the Group of Seven summit, taking up measures to counter fears of a global slowdown exacerbated by the U.S.-China trade row. Trump and other world leaders, however, remained at odds, making the adoption of a joint statement unlikely.

Signs of economic turmoil have been in plain sight since last week. After China announced it would impose $75 billion in retaliatory tariffs on U.S. goods, Washington swiftly struck back, radically escalating the conflict.

Trump declared that the U.S. would jack up existing tariffs on $250 billion of Chinese goods to 30 percent from 25 percent starting in October, as well as on another $300 billion of Chinese goods to 15 percent from 10 percent in September.

Trump also demanded that U.S. firms cease business engagements with Chinese counterparts, citing the International Emergency Economic Powers Act of 1977. The act enables the president to regulate international commerce upon declaration of a national emergency.

Invoking the act would be an extraordinary step that the market hadn’t anticipated, Miyairi said. The executive authority could give a leeway to Trump to order U.S. business operating in China to exit the country, he said.

“This is something completely new and it could have consequential effects on the Chinese economy,” Miyairi said. “Thus, I think, risks have gone up.”

Separately, analysts said market reactions were muted to news that an agreement in principle had been made on a U.S.-Japan trade deal.

On Sunday, the U.S. and Japan announced they had made substantial progress on a bilateral pact, with a formal agreement expected in September. The deal entails Japan slashing tariffs on U.S. farm products not beyond the level of the Trans-Pacific Partnership. The U.S. withdrew from the major trade deal involving Pacific Rim countries in 2017.

While Japanese officials remain hopeful, it is not guaranteed that the U.S. would refrain from raising tariffs on Japanese cars and auto parts.

“(Reaching an agreement) was within the market’s expectation,” Ota of SMBC Nikko Securities said. “It is not bad news. But Japan is not the main battlefield (for the U.S.).”

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