Where Does U.S.-Japan Trade Negotiation Stand? Japan “Wants It All”: A Good Deal and a Stable Yen

TradingKey - Japan was among the first countries to enter trade negotiations with the Trump administration. Yet, despite months of talks, there has been no major breakthrough in the U.S.-Japan trade discussions. The main reason for this delay appears to be Japan’s increasingly firm stance — resisting two of President Trump’s core demands: yen appreciation and automotive tariffs.

In early April, U.S. Treasury Secretary Scott Bessent clearly stated that Japan holds priority status in U.S. tariff negotiations.

Many analysts had initially expected that, given the strong U.S.-Japan alliance and historical precedents such as the 1985 Plaza Accord, the U.S.-Japan trade talks would move forward swiftly and potentially serve as a model for other trade agreements.

However, by mid-May, the more challenging U.S.-China negotiations had already produced an unexpectedly positive Geneva agreement, while the U.S. and Japan were still locked in a tug-of-war.

Japanese and U.S. negotiators have held two rounds of talks, with a third round scheduled for next week.

A Japanese official revealed that although Tokyo was eager to become the first country to reach a tariff deal with the U.S., that urgency has now shifted toward ensuring that any agreement must be a “good deal” for Japan.

Japan Demands: Tariff Removal and No Currency Commitments

On one hand, the Japanese government is pushing for the complete removal of all newly imposed U.S. tariffs — including the 25% tariffs on automobiles, steel, and aluminum, as well as the 24% tariffs on other Japanese exports.

One official emphasized that automotive exports — including cars and auto parts — are Japan’s largest export sector to the U.S.. Without progress in this area, reaching a comprehensive agreement will be impossible.

On the other hand, Japanese Finance Minister Katsunobu Kato stressed that exchange rate fluctuations should be determined by market forces, and excessive volatility could harm economic and financial stability.

Currency targets were not discussed during the April negotiations. However, Kato has indicated that he intends to bring up exchange rate issues in the upcoming meetings.

Rumors surrounding the so-called "Mar-a-Lago Agreement" reportedly included coordinated efforts to weaken the U.S. dollar. In the context of U.S.-Japan negotiations, the U.S. may pressure Japan to actively appreciate the yen — a move that could significantly hurt Japan’s export-driven economy.

As of writing (May 16), the USD/JPY exchange rate stood at 145.34, having fallen to as low as 139.88 last month.