Driving the news: Japan's $1 trillion investment promise to appease President Trump on trade has backfired, with the U.S. imposing 25% tariffs on Japanese imports starting August 1.
For context: Prime Minister Shigeru Ishiba's February meeting with Trump seemed successful after pledging massive U.S. investments, with Trump calling their relationship "fantastic" and expecting no trade problems. Japanese negotiators stuck to this investment-focused strategy through seven Washington visits between April and June, hoping to avoid politically sensitive concessions like lowering rice import barriers ahead of Japan's July 20 election.
Why it matters: The strategy completely unraveled when Trump called Japan "spoiled" last week, complaining about Tokyo's reluctance to buy U.S. rice despite having a "massive rice shortage." The automotive sector (which employs one in ten Japanese workers and accounts for a fifth of exports) remains vulnerable to tariffs despite Japan's investment promises.
What we're watching: Ishiba faces a difficult election where his ruling coalition risks losing its upper house majority, potentially threatening his government. Some Japanese officials now believe Tokyo must change course and consider lowering agricultural import barriers, while others insist the U.S. must reduce automotive tariffs for any broader deal.
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