Tokyo battles critics of the agreement, saying $550 billion in funding for U.S. industry will be almost entirely loans and loan guarantees
A worker held up an edition of a newspaper reporting that President Trump had announced a trade deal with Japan, in Tokyo, last week. Photo: Eugene Hoshiko/Associated Press
TOKYO—Japan is playing down the risks from its trade deal with President Trump after the White House said the U.S. would direct $550 billion in investments by Japan and keep 90% of the profit.
Tokyo’s chief negotiator, Ryosei Akazawa, said Monday that the government bank at the center of the investment deal would strictly review the projects it is asked to finance and approve only those that comply with Japanese law. Critics of the deal have suggested Tokyo would have to follow Trump’s orders on what to fund, potentially threatening the finances of the Japan Bank for International Cooperation, or JBIC.
Over the weekend, Akazawa said that only 1% to 2% of the $550 billion amount would be actual investment, with the rest coming in the form of loans and loan guarantees.
The government is facing a backlash from opposition lawmakers and some analysts who expressed concern that the trade agreement, as described by Trump and the White House, could humiliate Japan.
A White House fact sheet released last week said “Japan will invest $550 billion directed by the United States to rebuild and expand core American industries.” It said “the U.S. will retain 90% of the profits from this investment—ensuring that American workers, taxpayers, and communities reap the overwhelming share of the benefit.”
The investment is part of a trade deal in which Trump agreed to place tariffs of 15% on Japanese goods including cars. Markets welcomed the deal because the 15% rate is lower than the tariffs Japan was already paying on cars and lower than the level Trump had threatened on other goods.
Takahide Kiuchi, a former Bank of Japan policy board member who is now an economist at Nomura Research Institute, said the language about investments didn’t sound like the win-win relationship Japan has been seeking. “It even feels as though Japan’s sovereignty is being infringed upon,” Kiuchi said.
Yoshihiko Noda, the leader of the largest opposition party, said that because of the vagueness of the $550 billion commitment, “differences in interpretation could become a minefield.”
The government of Prime Minister Shigeru Ishiba is walking a fine line in responding to the criticism, avoiding direct confrontation with Trump while saying the deal allows Japan to defend its interests. Ishiba is hanging by a thread after an election defeat July 20.
Akazawa, the chief Japanese negotiator, told public broadcaster NHK over the weekend that he expected the investment portion of the deal to come to about 1% to 2% of the $550 billion framework. He also said Japan could stretch the commitment out over the remaining 3½ years of Trump’s term.
A Japanese government fact sheet said government-affiliated financial institutions would handle the $550 billion commitment, not private-sector companies. In general, government institutions such as the JBIC focus on loans and loan guarantees, and direct investment in factories and mines is only a small part of JBIC’s work.
If Japan’s government banks issue loans to U.S.-based projects, they could be expected to earn tens of billions of dollars in interest, said Dai-ichi Life Research Institute economist Hideo Kumano.
“President Trump’s statement about ‘90% of the profit to the U.S., 10% to Japan’ is purely to draw the attention of his domestic supporters,” Kumano said. The actual deal “doesn’t sound so bad,” he said.
No formal written version of the trade deal has been released, and key terms of Japan’s commitments including the $550 billion investment deal were unknown.
Akazawa, the negotiator, said he was pushing the U.S. to quickly implement the terms of the deal, and Japan’s finance minister said Monday he expected Trump to sign an executive order this week.
Write to Megumi Fujikawa at megumi.fujikawa@wsj.com and Yang Jie at jie.yang@wsj.com
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