TOKYO: Japanese automaker's shares led a surge in the Nikkei share average on Wednesday, while bonds slid after US President Donald Trump said he had reached a trade deal with Tokyo.

The Nikkei rallied 2.4 per cent to 40,731.86, as of 0121 GMT, with the Tokyo Stock Exchange's transport equipment index surging 8.4 per cent. Toyota Motor soared 10.9 per cent.

Benchmark 10-year Japanese government bond futures tumbled as much as 1.01 yen to 137.59 yen, their lowest since March 28.

The cash 10-year JGB slumped, sending the yield up 8.5 bps at 1.585 per cent.

Trump on Tuesday said in a post on his Truth Social platform that the US and Japan had struck a trade deal that includes a 15 per cent tariff that will be levied on US imports from the Asian country, down from a threatened levy of 25 per cent.

Japanese national broadcaster NHK reported that specific duties on Japanese auto imports would be 15 per cent instead of 25 per cent, citing government sources.

"Though details are not yet available, it is commendable that the 25 per cent baseline tariff was avoided," said Norihiro Yamaguchi, senior Japan economist at Oxford Economics in Tokyo.

"Lowered uncertainty will be welcomed in the equity market."

Bank shares also gained, sending the TSE's banking index up 3.7 per cent.

The reduced economic uncertainty helped to clear the path for the Bank of Japan to resume interest rate hikes, with its next policy meeting set for Wednesday and Thursday of next week.

"I don't think this alone will lead to a Bank of Japan rate hike next week, but the possibility of a rate hike between September and October has increased," said SMBC chief currency strategist Hirofumi Suzuki.

"This will create pressure to buy yen."

The yen flipped between gains and losses immediately after Trump's social media post. It was last up about 0.1 per cent to 146.48 per dollar.