Japan faces growing pressure to strike a trade deal with the US

Japan’s friendly, steady approach to trade talks is under pressure as President Donald Trump pushes for an agreement before new U.S. tariffs kick in on July 9.

So far, Japan’s careful approach hasn’t worked, raising worries it could be an easy target as Washington pushes for quick wins. Tokyo relies on the United States for both trade and security, and has avoided direct confrontation, unlike China, which has taken a tougher stance.

Japan’s chief negotiator, Ryosei Akazawa, has flown to Washington seven times in recent months to continue smooth negotiations. Yet, on his most recent trip, he couldn’t meet Treasury Secretary Scott Bessent in person, and he only spoke twice by phone with Commerce Secretary Howard Lutnick, according to Bloomberg.

“Most times I’m taking off from Haneda Airport without a confirmed schedule of meetings,” Akazawa said after returning to Tokyo on Tuesday.

Domestic politics also shape Tokyo’s approach. officials don’t want to give up too much before the key national vote on July 20th.

“The government is stuck between US expectations and domestic pressure not to give up too much before the election,” said Rintaro Nishimura of The Asia Group.

Meanwhile, Trump has publicly slammed Japan for not buying enough American cars and for refusing to import U.S. rice, posting that Japan has a “massive rice shortage.”

Japanese leaders have responded carefully to avoid escalating tensions, hoping for an agreement.

“We expect a package to span various fields and become quite extensive,” he said, adding that both reciprocal and sector-specific tariffs must be resolved.
Investors, for now, seem unfazed. “The bark is worse than the bite,” said Rajeev De Mello, a portfolio manager in Geneva, predicting that any new duties will remain around 10%.

Tokyo focuses on jobs and autos as key to U.S. trade talks

Tokyo’s offer to Washington is based on jobs and investment, with a special focus on the auto industry.

Trade Minister Koichi Ishiba’s team wants to cut the 25% levy on Japanese cars and lower planned 24% duties on other goods set to start on July 9.

Moreover, Japan has offered to collaborate on shipbuilding and boost purchases of American semiconductors and liquefied natural gas. A similar strategy helped Nippon Steel win approval for its takeover of U.S. Steel, but experts say Tokyo may need a larger package to meet Washington’s demand for something big.

Japan’s auto sector is critical; about 10% of the nation’s GDP and some 8% of its workforce depend on it.

Officials hope to bring car tariffs closer to 10% to show progress before the election. One possible trade-off is to open Japan’s rice market, but that risks alienating rural voters. Agriculture Minister Shinjiro Koizumi supports talks that maximize benefits for Japan, and chief negotiator Akazawa has ruled out sacrificing farmers to protect auto interests.

According to policy expert Kenichi Kawasaki of the National Graduate Institute for Policy Studies, Japan may also need to eliminate non-tariff barriers on car imports and cut duties on its own farm products, including rice. Even so, another 10% U.S. levy on cars seems likely.

Trump has warned he may skip negotiations and simply send countries a letter with their new tariff rates. Asked if he would alert the press if such a letter arrived, Akazawa smiled and said, “If it comes to that, I think you’ll find that President Trump will have announced it already on Truth Social.”

Japan’s business outlook stays strong

A Bank of Japan survey released Tuesday showed large manufacturers’ confidence rose slightly to +13 in June, up from +12 in March and beating forecasts of +10. But the same tankan survey found firms slashed profit projections and expect conditions to worsen over the next three months.

Confidence among big non-manufacturers dipped to +34 from +35, as rising labor costs and weaker luxury-goods sales to tourists weighed on sentiment.

Some companies reported higher profits by passing on cost increases, while others said wage hikes and fewer foreign visitors hurt their earnings. The survey, covering April through June, suggests Japan’s economy remains resilient despite growing trade uncertainty, even as firms brace for the impact of new U.S. duties.

Policymakers at the Bank of Japan will review these findings at their July 30–31 meeting, weighing whether to begin tightening policy later in the year. Marcel Thieliant, head of Asia-Pacific research at Capital Economics, said the survey supports a tightening cycle before year-end.

Japan’s economy shrank at an annual rate of 0.2% in the first quarter, hurt by weak consumer spending. With U.S. car tariffs set back at 25% and 24% on other goods after July 9, exporters face fresh headwinds.

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