Japan-US Trade Talks Delayed Over Tariffs and Investment Plan

Japan-US Trade Talks Postponed Amid Tariff Disagreements

Japan's chief trade negotiator, Akimasa Akazawa, has canceled his trip to the United States due to disagreements surrounding the US-Japan trade agreement. Chief Cabinet Secretary Hirokazu Matsuno revealed in a statement that his trip was intended to address the issue of US tariffs. Matsuno told reporters that, "During coordination with the US side, some points requiring further technical discussions emerged, so (Akimasa Akazawa) canceled this trip and it was decided that discussions will continue at the administrative level."

Key Points of Contention

Tokyo is urging Washington to revise its presidential order regarding reciprocal tariffs as soon as possible and to issue a presidential order to lower tariffs on automobiles and auto parts. A White House executive order currently sets the base tariff rate for Japan at 15%, but there has been no written confirmation of a reduction in tariffs on automobiles from 25% to 15%. Akazawa reportedly stated in July that the US had promised to revise the executive order on reciprocal tariffs to include a “non-stacking” option, where tariffs would not accumulate on top of the 15% base. This would be similar to arrangements made with the European Union. He emphasized on Thursday the "utmost importance of the faithful and prompt implementation of the Japan-US agreement."

Potential Impact on the Japanese Economy

Bank of Japan board member Junko Nakagawa stated on Thursday that while an agreement had been reached on tariff negotiations between the two parties, many uncertainties still existed. She warned that Japan's exports and industrial production are expected to be negatively impacted “for the time being,” and noted there would be a “reactionary decline” due to “front-loading” purchasing behavior ahead of the US tariffs. Nakagawa said corporate profits are also expected to decline, primarily in the manufacturing sector, “reflecting a deterioration in export profitability due to increased US tariffs, and the impact of a slowdown in the overseas economy.”

Investment Plan Under Negotiation

Akazawa's agenda also included details of the $550 billion investment plan Japan offered to the US in exchange for lower import tariffs, and securing written confirmation. US Commerce Secretary Wilbur Ross had stated in a Fox News interview that the US would be issuing a statement regarding the plan. The $550 billion plan was announced as part of a deal Tokyo reached with the US in July, which lowered so-called reciprocal tariffs from 25% to 15% and cut tariffs on Japan's key auto industry to 15%. However, some conflicting messages have emerged surrounding the $550 billion investment plan, with Trump touting the plan as "money we get to invest as we please." "Some people are saying that Japan simply handed over $550 billion," Akazawa said after the trade agreement was announced. "But that claim is far from the truth." He also stated that returns would be distributed between Japan and the US based on each side's contribution, while also acknowledging the US side was willing to contribute a larger share.