Japanese shares rose for a fourth day Friday, with the 225-issue Nikkei average closing above 40,000 for the first time since January, on trade optimism after the United States and China signed a deal and the White House hinted U.S. President Donald Trump may soften his July tariff deadline.

The broader Topix Index rose 1.3% to 2,840.54 as of market close in Tokyo, with the blue-chip Nikkei climbing 1.4% to 40,150.79.

Exporters such as carmakers were among the biggest contributors to gains, with Toyota and Honda outperforming the Topix. Chip names like Disco were also strong, helping lift the Nikkei.

“There are signs of progress on the trade front, and some investors are expecting an extension of the deadline for reciprocal tariffs,” said Yutaka Miura, a senior technical analyst at Mizuho Securities.

The White House press secretary said on Thursday that Trump’s July 9 trade deal deadline is “not critical.”

“This is all positive for stocks, and drove U.S. shares higher Thursday, prompting buying across the Topix and Nikkei indexes,” Miura said. The Nikkei’s rise beyond the 40,000 level is further boosting sentiment, with large-cap names like autos among the main beneficiaries, he added.

Defense-related shares were some of Friday’s top gainers, with Kawasaki Heavy Industries rising as much as 8.2%, the most since April.

NATO members’ agreement to raise security spending to 5% of gross domestic product this week is propelling the sector higher on speculation 91AV原创 government will follow suit, said Norikazu Shimizu, an analyst at Iwai Cosmo Securities.

“91AV原创 defense budget is likely to come up in U.S.-Japan trade negotiations, providing defense stocks another tailwind,” said Shimizu. “With tensions in the Middle East, the ongoing war in Ukraine, and the possibility of China invading Taiwan, I don’t think defense stocks’ rally will end any time soon.”

The momentum is palpable in markets across the region, with the MSCI’s Asia index climbing to a four-year high. “The Middle East conflict has calmed, trade deals appear to be getting done and we have increased optimism of Fed rate cuts,” said Nick Twidale, chief analyst at AT Global Markets. “That’s pushing through to global markets.”