US and Japan Arrive at Deal Thanks to ‘Innovative Financing’
On 22 July 2025, US President Donald Trump in his habitual manner announced the US has arrived at ‘a massive deal’ with Japan. “I just signed the largest trade deal in history; I think the largest deal in history with Japan,” declared Trump. The deal come after an important meeting in Tokyo between US Treasury Secretary Scott Bessent and Japan’s PM Shigeru Ishiba as part of an official visit in the context of the World Expo 2025.
Japan is the fifth largest trading partner of USA. In 2024, Japan exported USD 148 billion of goods according to data from the US Department of Commerce. Cars, car parts, agricultural and construction machinery were among the top product categories that US buys from Japan. On the other hand, the US exported USD 80 billion of goods in 2024. Hydrocarbons, pharmaceuticals and planes were the top exports to Japan.
The deal allows for a reciprocal tariff between US and Japan of 15% on both sides. Previously, Trump threatened a 25% tariff on Japan on ‘Liberation Day’. The 15% tariff covers automobiles and spare parts, putting Japan at an advantage compared to other car makers which have to contend with higher tariffs. Steel and aluminum are considered strategic commodities and are still subject to a 50% tariff globally.
Trump has been critical toward countries such as Japan, which maintain a trade surplus with the US. Thus, Japan is opening its domestic rice market, which was highly protected, to imports from the US. Trump would like to see more American vehicles on Japanese roads, but could prove to be quite a big challenge.
Japan is committed to procure 100 Boeing passenger jets. As a key partner within the geostrategic space, Japan will procure more US defense equipment and the two may even partner to increase navy shipbuilding capabilities.
Japan has agreed to invest USD 550 billion into the US. The financial flux will come in the form of equity and loan to support Japanese firms investing and expanding in the US. The key targeted industries include semiconductors, critical minerals, pharmaceuticals and defense.
Trump claims that ‘90% of the profits will be for the US’ whereas the Japanese side pointed out that benefits will be determined based on the financial involvement and risk taken.
Back in January 2025, Softbank of Japan also announced a USD 500 billion investment into the US over the four-year mandate of President Trump. It is not absolutely clear at this point if the USD 550 billion is a cumulative or additive.
Trump is also eager to seek investment partners for a gas pipeline in Alaska. So far, the US has engaged Japan, South Korea and Taiwan to invest in the Alaska venture.
It is worth highlighting that Japan has emerged as the top foreign creditor of the USA, by holding nearly USD 1.1 trillion in US treasuries. China was once the top creditor with the USA but as relations sour, China has reduced its exposure US T-bills.
Overall, the Japanese economic actors welcomed the deal in a positive manner. On 23 July 2025, the day after he announcement of the deal, the Nikkei rose by a robust 1,396.4 points to close at 41,171.32, gaining 3.51%. The broader TOPIX ended at 2,926.38, up 90.19 points, or 3.18%.
Observers noted that the deal between US-Japan could serve as template for South Korea and Taiwan, and even the EU. In essence, the USA is pushing for bigger investments in exchange for smaller tariffs.