After months of bruising talks—and an Oval Office finale where numbers were literally crossed out on a placemat—Japan accepted a deal that swaps lower US tariffs (cut to 15%) for a massive $550 billion investment pledge into American projects. The extraordinary twist: the White House effectively gets to pick the projects, and Japan must review and finance them within 45 business days or risk higher tariffs snapping back, the New York Times reported.
Why Japan said yes
The April tariff shock (24% on Japan) spooked policymakers and exporters, especially automakers. Ryosei Akazawa, then the “tariff minister,” pursued a deliberately deferential strategy to secure relief. The result brought tariff certainty and a path to de-escalation—vital for supply chains and capex planning—even if the price tag is eye-watering and the optics awkward at home.
The new political lineup
Sanae Takaichi has just become prime minister and kept Akazawa close by naming him economy minister. She signalled discomfort with the deal on the campaign trail but has since dialled back talk of reopening it. Her first face-to-face with President Trump will be about two asks from Washington: honour the $550bn pledge and step up defence spending—while Tokyo tries to retain some say over where and how the US investments are deployed.
Why the fine print is so unusual
The memorandum gives the US president de facto “CIO” power over the fund’s allocations and sets a rapid approval clock for Japan. Profits, after Japan recoups principal, skew heavily toward the US The instrument isn’t a treaty and isn’t strictly legally binding, but politically it’s designed to be hard for Tokyo to ignore without risking tariff retaliation.
How business sees it
Automakers and big exporters get tariff relief and clarity on market access, which helps earnings visibility. The trade-off is that a large share of Japan’s fiscal and financing firepower will be steered offshore, on a timetable and priority list the US controls. That raises questions about crowding out domestic priorities and whether the chosen projects serve Japan’s industrial strategy, energy security, or tech roadmap.
The Akazawa method—did it work?
Akazawa’s “disarm with deference” approach—MAGA hat photo ops, marathon calls with US officials, near-monthly trips—was mocked at home but did move the ball. The calculation: accept headline-level concessions now to stabilize tariffs and then shape execution later. With Takaichi in charge, the next phase is less about theatrics and more about clawing back influence during implementation.
The risks from here
The biggest near-term risk is project selection risk: if Washington channels money toward assets that don’t advance Japan’s strategic interests, Tokyo either swallows it or invites tariff pressure. Execution risk looms too—$550bn needs shovel-ready projects, fast due diligence, and financing pipelines without missteps. Fiscal optics matter: with a heavy debt load, funding foreign projects could trigger domestic pushback unless returns and spillovers are clear.
Bottom line
Japan bought tariff stability with a very large, very unusual check—and ceded a lot of say over how it’s spent. If Tokyo can bend execution toward projects that fit its own strategy, the pain may be worth it. If not, the “price of playing to Trump” could keep climbing.
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