1 Japan-US Deal: $550B Investment for 15% Tariffs

Japan-US Deal: $550B Investment for 15% Tariffs

On July 23, 2025, a landmark agreement was announced that will remain etched in Japan’s political and economic history. The Japan-US tariff agreement, which President Trump called “the largest deal ever” on his Truth Social platform, superficially reduced mutual tariffs from 25% to 15%. However, it concealed an astounding $550 billion (approximately 80 trillion yen) investment to the US and unprecedented terms where the US would receive 90% of the profits—conditions unacceptable to many Japanese citizens.

This agreement was announced immediately after the ruling coalition suffered a historic defeat in the July 21 House of Councillors election, losing its majority in both houses of the Diet for the first time since the Liberal Democratic Party’s founding in 1955. The timing, when Prime Minister Ishiba’s administration was at its most vulnerable, has sparked criticism that it exposed the limits of Japan’s negotiating power.

Agreement Details: Surface “Achievements” and Hidden Massive Concessions

Tariff Rate Changes

The tariff rate changes in this agreement are as follows:

Item	Pre-Agreement Status	Post-Agreement Terms	Impact/Notes
Mutual Tariffs	Up to 25% threatened	15% set	Lowest among US trade deficit nations
Auto Tariffs	25% (additional tariff)	15% (including existing rates)	Reduction without quantity limits
Steel/Aluminum	50% additional tariff proposed	Unchanged (outside agreement)	Remains for future negotiations
US Investment	—	$550 billion (≈80 trillion yen)	Phased implementation over years
Profit Distribution	—	90% to US	Unprecedented terms

Prime Minister Ishiba emphasized this as “the lowest tariff rate among countries with trade surpluses with the US,” but this “achievement” has complex circumstances behind it. While 15% is indeed lower than the initially feared 25%, it represents effectively a tariff “increase” for items previously untaxed.

The Shocking $550 Billion Investment

The most controversial aspect is Japan’s $550 billion (approximately 80 trillion yen) investment in the US. To understand the scale of this amount, consider these comparisons:

The Scale of 80 Trillion Yen:

Equivalent to approximately 70% of Japan’s general account budget
Four years’ worth of annual consumption tax revenue (≈20 trillion yen)
Approximately 660,000 yen burden per Japanese citizen
Exceeds Japan’s annual tax revenue of 75 trillion yen

Fierce Online Criticism:

“90% of profits to the US←What???? This isn’t investment, it’s usury”
“Are we a colony?”
“This isn’t a ‘deal,’ it’s ‘tribute.’ We’re already a vassal state.”
“A massive exploitation system” “An impossible deal”

The investment reportedly includes Japan’s cutting-edge technologies such as Denso’s solid-state battery factories and Kawasaki Heavy Industries’ liquid hydrogen carriers, raising concerns about technology transfer.

Agricultural Market Opening Details

Product	Agreement Terms	Concerns
Rice	Maintain minimum access (770,000 tons/year) Increase US import ratio	Downward pressure on domestic rice prices
Other Agricultural Products	Market opening (details undisclosed)	Increased GMO crop imports
Automobiles/Trucks	Improved market access	Pressure to increase US vehicle imports

“Japanese farmers will be wiped out”
“We’ll be forced to buy GMO and pesticide-laden agricultural products forever”
“Japan no longer has national interests”

Negotiation Timeline: Trump Administration’s Gradual Pressure and Japan’s Concessions

Chronology of Tariff Implementation

Trump Administration’s Staged Tariff Pressure:

February 1, 2025: 25% additional tariffs on Canada/Mexico, 10% on China
March 12: 25% additional tariffs on steel/aluminum products
April 2: 25% additional tariffs on all automobile imports announced (effective next day)
April 2: “Reciprocal tariff” policy announced, suggesting up to 25% surcharge on trade surplus nations including Japan
May: 25% tariffs expanded to major auto parts including engines

These measures severely impacted Japanese automakers:

Company	Projected Loss (at 25% tariff)	Decline Rate
Toyota	≈2.16 trillion yen	35% decrease
Honda	Net profit 250 billion yen	70% decrease
Suzuki	Net profit 320 billion yen	23% decrease
Mitsubishi Motors	Net profit 40 billion yen	2% decrease
Total Impact on 7 Automakers		Up to ≈1.7 trillion yen

Evolution of Japan’s Negotiating Position

Gradual Retreat in Negotiating Stance:

Initial Stage: Aimed for complete elimination of auto tariffs
Middle Stage: Shifted focus to tariff rate reduction
Final Stage: Compromised with “investment over tariffs” approach

Minister Akazawa flew to the US nine times in first class for intensive negotiations, but ultimately was forced to make substantial concessions.

“The ‘mission’ completed after nine first-class trips to the US was to offer 80 trillion yen to America and give them 90% of the profits. Truly ‘Country destroyed, miles earned.'”

Fierce Criticism of the Ishiba Administration: Accusations of “Selling Out the Country”

Suspicions About Agreement Timing After Election Defeat

In the July 21 House of Councillors election, the ruling coalition suffered a historic defeat, falling far short of a majority. This marked the first time since the LDP’s founding in 1955, about 70 years, that it lost majority control in both houses simultaneously, raising serious questions about Prime Minister Ishiba’s legitimacy as a leader.

Criticism of Election Defeat and Agreement Timing:

“[Sad News] The LDP-Komeito administration, after losing badly in the Upper House election, immediately sells out the country… spending 70% of the general account budget on US investment for a 15% tariff agreement”
“Ishiba got crushed”
“As expected, Ishiba Shigeru couldn’t handle the negotiations.”
“For the Trump administration, the amateur Ishiba administration was like twisting a baby’s arm.”

Mockery of “National Interest Negotiations” Statement

After the agreement, Prime Minister Ishiba stated it was “the result of negotiations staking national interests,” but this statement became a target of fierce criticism:

“Ishiba didn’t fight at all, he just handed everything over! This is the result→Trump: ‘Japan will invest 80 trillion yen in the US, and the US will receive 90% of the profits’ posted on SNS”
“Last-minute negotiations resulted in a crushing defeat! This is insane!”
“80 trillion⁉️ Wait! This is the best you could do? Unbelievable!”

Particularly, Trump’s expression that Japan would invest “under my direction” sparked successive criticisms that Japan’s sovereignty was being violated.

Calls for Ishiba’s Resignation

Growing Demands for Resignation:

“Hey Ishiba, declare your defeat. What are you going to invest 80 trillion yen in over how many years? Japan’s tax revenue is 75 trillion yen, right? Are we supposed to pay taxes for America’s benefit for an entire year?”
“This is Prime Minister Ishiba’s achievement! There’s no reason to stay as PM anymore. In a way, this is President Trump giving you an honorable exit! Please resign!”
“Are you trying to destroy not just the LDP but Japan itself?”

However, Prime Minister Ishiba denied resignation, stating “There has been no discussion whatsoever about my stepping down,” indicating his intention to continue. This prompted sarcastic comments like “The negotiation’s end gives him a reason to quit” and “Boss Trump eliminated his reason not to resign.”

Serious Impact Analysis on Japan’s Economy

GDP Suppression Effect Estimates

GDP Impact Estimates by Various Think Tanks:

Mizuho Research & Technologies: 25% mutual tariffs would suppress GDP growth by 0.78%
Chubu Region Social Economic Research Institute: Production decrease of 2.78 trillion yen in 9 Chubu prefectures alone, GRP down 0.8 points
Jitan Tech: Even 15% mutual tariffs would suppress real GDP growth by 0.5-1.0%
Economists Overall: Could suppress Japan’s GDP by 0.2% to 1.8%

Meiji Yasuda Research Institute’s Yuichi Kodama analyzes that while the 15% agreement “avoids a severe recession,” economic recovery will be maintained “just barely.”

Compound Impact on the Automobile Industry

The impact on Japan’s core automobile industry is multifaceted:

1. Direct Impact on Profits

Toyota: Projected profit decrease of up to 2.16 trillion yen due to tariffs
Honda: Net profit down 70% to 250 billion yen
Mazda, Subaru: Rushing to expand local production but facing increased investment burden
Tariff impact on 7 automakers: Up to approximately 1.7 trillion yen

2. Pricing Strategy Revision
Companies face difficult decisions about passing on tariff costs. Toyota has indicated a policy of “passing some tariff costs to prices (price increases) while absorbing some through corporate efforts,” but loss of competitiveness in the US market is inevitable.

3. Supply Chain Restructuring
According to Jitan Tech’s analysis, the 15% tariff will accelerate the “inside the fence” strategy—strengthening production and procurement within the US. However, production relocation requires time and massive investment, forcing continued exports in the short term.

Impact on Foreign Exchange Markets

The tariff agreement and 80 trillion yen US investment significantly impact foreign exchange markets:

Impact Factor	Effect on Exchange Rate	Economic Impact
80 trillion yen US investment	Continuous yen selling/dollar buying pressure	Tailwind for exporters
Trade balance deterioration concerns	Medium to long-term yen weakening factor	Increased burden on citizens from higher import prices
Risk aversion movements	Temporary yen strengthening (safe haven buying)	Pressure on exporter profits

MUFG notes that the exchange rate temporarily strengthened from around 155 yen per dollar to 140 yen, warning that rapid yen appreciation could continue depending on President Trump’s statements, posing unexpected risks to Japan’s economy.

Devastating Impact on Agriculture

Concerns from Agricultural Market Opening:

Downward pressure on domestic rice prices from increased US rice imports
Increased influx of GMO crops and agricultural products with different pesticide standards
Serious damage to regional economies, especially rural areas
Further decline in food self-sufficiency

“Trump… wants to protect American farmers. He doesn’t care what happens to Japanese rice farmers.”
“Ishiba protected export companies’ profits over Japanese farmers”
“Rice imports also run counter to agricultural revitalization”

US Economic Security Strategy and Japan’s Position

Trump Administration’s Multilayered Economic Security Policy

This agreement must be understood as part of US economic security policy:

Four US Strategic Objectives:

Trade Deficit Correction: Demanding correction of Japan’s US trade surplus (≈7 trillion yen in 2024), calling it “exploitation”
Domestic Industry Protection: Justifying tariffs claiming “cheap imports threaten US auto industry infrastructure and supply chains”
Technology Hegemony: Securing dominance in advanced fields like semiconductors, AI, quantum technology
Supply Chain Reorganization: Building new supply chains excluding China

Japan’s Shift to “Investment Diplomacy”

Prime Minister Ishiba adopted an “investment over tariffs” approach, effectively capitulating to US demands. The 80 trillion yen investment is expected to target these areas:

Investment Area	Specific Examples	Concerns
Semiconductor Manufacturing	Cutting-edge chip factories	Technology leakage risk
Battery Plants	Denso’s solid-state batteries	Loss of competitive advantage
Hydrogen Energy	Kawasaki Heavy’s liquid hydrogen carriers	US-biased development investment
Defense Industry	Joint development projects	Decline in self-defense capabilities
AI/Quantum Technology	R&D centers	Brain drain

However, these investments being made under terms where “90% of profits go to the US” has drawn significant criticism.

Historical Context: Comparison with Past Japan-US Trade Friction

Viewing this agreement in historical context recalls the Japan-US trade friction of the 1980s:

Comparison with Past Japan-US Trade Friction:

1985 Plaza Accord: Yen appreciation to reduce export competitiveness
1980s Voluntary Restraints: Quantitative limits on auto exports
Structural Impediments Initiative: Intervention in Japan’s economic structure itself

However, this agreement represents concessions exceeding these past agreements. The 80 trillion yen investment surpasses any previous agreement in scale, and the terms of “90% of profits to the US” are extremely unusual for an agreement between sovereign nations.

Domestic Reactions: From Business Community to General Public

Complex Business Community Response

Keidanren Chairman Tsutsui welcomed the agreement saying it “bore fruit from persistent negotiations focused on national interests,” but this statement drew fierce criticism:

“What achievement? Negotiate harder. Are there only carefree old men making money with other people’s money?”
“Keidanren has degenerated into a traitorous organization”
“Are they stupid?”
“Sycophantic cheerleading”

Meanwhile, an auto parts company president expressed gratitude that tariffs were kept to 15% instead of 25%, calling it “very welcome” and an “achievement.” Japan Foreign Trade Council Chairman Yasuo Nagayasu also commented, “We greatly appreciate that the uncertainty private companies were concerned about has been removed.”

Stock Market Reaction

After the agreement announcement, the Nikkei average surged 1,396.40 yen (3.51%) to close at 41,171.32 yen, hitting a one-year high:

Stock	Price Increase	Market Cap Increase
Toyota	Up 16% at one point	Over 5 trillion yen in one day
Honda	Up 11%	—
Nikkei Average	Up 3.51%	Year-to-date high

Market analysts explained this rise as “favorable buying dominated following the Japan-US tariff negotiation agreement and reports of Prime Minister Ishiba’s potential resignation.”

However, cynicism from the general public:

“Japan: Tariffs are 24%!↓We’ll make it 10% for now↓Not listening? Maybe 30%?↓25%!↓Fine, if you invest in America and buy rice, we’ll make it 15%↓Japan rejoices, Nikkei +1100←We are here. Like monkeys happy with morning three, evening four.”

General Public’s Anger and Resignation

Online, anger and resignation about the agreement details intermingle:

Concerns about Funding:

“Where’s the 80 trillion yen coming from? If we’re giving America 80 trillion yen as a present, Japan’s consumption tax generates 25 trillion yen annually, so we could have eliminated it for at least three years?”
“Eliminating consumption tax would have been far cheaper!!”

Tax Increase Anxiety:

“Don’t start saying we need tax increases to raise this money!”
“Politicians are too incompetent”

Demands for Domestic Investment:

“If we have that money, we should invest 80 trillion yen domestically”
“This means approximately 660,000 yen per citizen in taxes will be used for America instead of Japan. It’s infuriating that this is allowed 😠”

Future Outlook: Japan’s Structural Economic Challenges

Short-term Challenges

Four Urgent Challenges:

Absorbing Tariff Costs: Companies seeking balance between price pass-through and profit compression
Rapid Supply Chain Reorganization: Investment burden from shifting to US production
Responding to Exchange Rate Fluctuations: Measures against rising import prices due to yen depreciation
Formulating Agricultural Support: Compensation for farmers damaged by market opening

Medium to Long-term Challenges

Need for Structural Reform:

Industrial Structure Transformation: Shift from export-led to local production/consumption model
Preventing Domestic Hollowing Out: Minimizing impact on domestic industries from US investment
Managing Technology Outflow: Risk management for cutting-edge technology transfer to US
Building New Growth Strategy: Diversified economic strategy reducing US dependence

Political Impact

Following the Upper House election defeat, the Ishiba administration may lose further support base due to this agreement criticized as “treasonous.” The opposition is expected to pursue:

Questioning the 80 trillion yen funding source
Demanding detailed disclosure of “90% of profits to US” terms
Requesting investigation of agricultural market opening’s impact on domestic farming
Demanding transparency in negotiation process

With growing calls for “immediate resignation” from within the ruling party, the administration’s future is extremely uncertain.

International Perspective: Responding to the New International Economic Order

Rise of Protectionism and Japan’s Choices

The Trump administration’s “America First” policy fundamentally challenges the postwar free trade system. Japan faces these choices:

Option	Content	Risks and Opportunities
Deepening US Dependence	Continuing to accept US demands as in this agreement	Security maintained but economic sovereignty lost
Multilateral Diplomacy	Strengthening ties with EU and Asia	Risk of deteriorating US relations
Autonomous Economic Sphere	Strengthening domestic market and new growth model	Short-term growth slowdown but long-term autonomy

Impact on Asian Countries

Japan’s major concessions may affect other Asian nations:

South Korea: May face similar pressure (US trade surplus nation)
Southeast Asian Nations: May benefit from Japan’s production base shift
China: Studying Japan’s precedent for US negotiations and strategy formulation
Taiwan: Watching impact on semiconductor industry

Expert Analysis and Recommendations

Economists’ Warnings

Think Tank Analyses:

SMBC Nikko Securities – Koya Miyamae:
“Large US investments raise concerns that domestic companies’ investment destinations will shift to the US in the medium to long term, leading to domestic hollowing out”

Meiji Yasuda Research Institute – Yuichi Kodama:
“The 15% agreement is close to the best result, but economic recovery will be maintained just barely”

Jitan Tech:
“This agreement is merely superficial friction mitigation; Japan will be forced into more fundamental economic structural transformation and strategic reorganization”

Bank of Japan Deputy Governor Shinichi Uchida:
“A major step forward, but uncertainties remain. The impact of tariffs on the economy is difficult to confirm with data”

Policy Recommendations

Experts propose the following policy responses:

Urgently Needed Policy Responses:

Promoting Domestic Investment: Domestic investment promotion matching US investment scale (2027 target: 115 trillion yen)
SME Support: Emergency financing and exchange rate measures for tariff-affected SMEs
Agricultural Structure Reform: Transformation to competitive agriculture resilient to market opening with income compensation
Technology Development Investment: Doubling R&D investment to secure next-generation technology superiority
Monetary Policy Adjustment: Appropriate monetary policy management responding to yen depreciation pressure

Conclusion: The Japan-US Tariff Agreement as a Historical Turning Point

The July 23, 2025 Japan-US tariff agreement was not merely a trade negotiation result but a historical turning point concerning Japan’s economic sovereignty and international standing. While superficially achieving the “result” of keeping tariffs at 15%, the price paid—an astronomical 80 trillion yen and unprecedented terms giving 90% of investment profits to the US—gave many citizens the impression of “selling out the country.”

The Ishiba administration was forced to accept what could be called a humiliating agreement at the worst possible timing following a historic defeat in the Upper House election. The Prime Minister’s words about “negotiations staking national interests” instead exposed the limits of Japan’s negotiating power and structural weakness vis-à-vis the United States.

Japan now faces these critical challenges:

Economic Challenges: Absorbing tariff costs, restructuring supply chains, preventing domestic industrial hollowing out, agricultural support, and above all, securing funding for the massive 80 trillion yen investment and the fundamental question of whether this investment will truly benefit Japan.

Political Challenges: Questions about the Ishiba administration’s legitimacy, opposition party pursuit, intra-party rebellion, and the difficult path to restoring public trust.

Diplomatic Challenges: Whether Japan can break free from US dependence and build more equal Japan-US relations, how to deepen cooperation with Asian nations, and how to maintain and improve Japan’s international position.

Structural Challenges: Transformation from the export-led economic model, revitalizing the domestic market, building new growth strategies, and above all, whether Japan can survive as a truly autonomous economic power.

The word “treason” circulating online is not mere emotional backlash but reflects citizens’ deep sense of crisis that Japan’s sovereignty and dignity are being threatened. History will judge whether this agreement was truly the right choice for Japan’s future, but at least at present, there’s no doubt that many citizens feel deep disappointment and anger about this agreement.

Japan now faces the greatest economic and diplomatic ordeal since the war. Whether it can overcome this crisis and be reborn as a truly autonomous economic power, or resign itself to being America’s economic vassal state—Japan stands at that crossroads.