Japan’s chief negotiator to visit Washington to salvage trade talks

Ryosei Akazawa, Japan’s chief negotiator on trade, confirmed on Saturday that he’s heading to Washington next week to meet U.S. officials for another ministerial-level negotiation.

This trip is an urgent push by Tokyo to prevent President Donald Trump’s 25% tariffs on Japanese imports from kicking in by the August 1 deadline.

Speaking in Osaka, where he hosted a U.S. delegation attending the World Expo 2025, Akazawa made it clear:

“I intend to keep on seeking actively an agreement that is beneficial to both Japan and the United States, while safeguarding our national interest.”

Despite Treasury Secretary Scott Bessent being present at the same event, Akazawa told reporters the two didn’t talk about tariffs.

This round of talks will be his attempt to break the gridlock, as Trump publicly stated just days earlier that he doesn’t expect a deal to be reached with Japan, raising alarms back home about how much worse things could get if negotiations stall.

Tokyo is desperate to avoid an economic hit that would come from broader tariffs, especially after seeing auto exports already slapped with a 25% levy—the very same industry that leads Japanese exports to the U.S.

Japan’s inflation softens but risks stay high

At the same time Akazawa is heading west, internal numbers are flashing red at home. Core inflation cooled down to 3.3% in June, dropping from 3.7%, which had been the highest rate in nearly two and a half years. That figure matched the expectations of economists polled by Reuters, though it still means inflation has run above the Bank of Japan’s 2% target for 39 consecutive months.

Headline inflation also dropped, from 3.5% in May to 3.3% in June. But it’s not all good news. The so-called core-core inflation rate, which strips out both fresh food and energy, exactly the metric BOJ uses to guide policy, ticked up to 3.4% from 3.3% in May. The increase puts even more pressure on Japan’s central bank as it weighs whether another interest rate hike is still on the table.

The biggest pain point remains rice prices. In May, rice prices exploded with a 101.7% year-over-year increase, the fastest rise in over 50 years. In June, it came down slightly to 100.2%, thanks to the government releasing emergency stockpiles earlier this year.

But prices are still way above normal. The spike traces back to poor harvests in 2023, which left Japan struggling through food inflation all the way from late 2024 into the first half of 2025.

Tariffs, shrinking GDP, and election jitters collide

Japan’s broader economy is already under stress. The country’s GDP contracted 0.2% in the first quarter of 2025 compared to the previous quarter, the first time in a year Japan’s economy has shrunk. That drop was driven by a sharp fall in exports, and fears are growing that more tariffs from Trump could crush whatever recovery plan Japan has left.

Krishna Bhimavarapu, APAC economist at State Street Investment Management, said the inflation slowdown gives some breathing room, but warned that the overall picture is fragile. He forecasted GDP growth at just 0.4% year-over-year in 2025.

“Even though we expect another hike from the BOJ this year, our conviction is weakened,” Bhimavarapu said, adding, “resultingly, market anxiety about the elections could spill into higher volatility and that is a key risk ahead.”

That election he’s talking about? It’s happening tomorrow, July 20. And it’s a big one. Japan heads to the polls for the Upper House election, and Nikkei reported that Prime Minister Shigeru Ishiba’s coalition might lose its majority.

That would throw Japan into political chaos at the worst possible time. Any shake-up in the ruling party during these trade negotiations with the U.S. could gut Japan’s ability to respond to the economic hit from Trump’s policies.

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