US-Japan trade deal lowers tariffs and boosts investment, President Donald Trump announced Tuesday. The agreement avoids a harsher 25% tariff hike and reduces levies on Japanese goods to 15%.
Trump said the deal includes $550 billion in Japanese investment into the United States and opens Japan’s markets to more American exports. “This is perhaps the largest Deal ever made,” he posted on Truth Social.
Details remain scarce. However, Trump claimed the U.S. will receive 90% of profits from Japanese investment. He also said the pact will create “hundreds of thousands of jobs.”
US-Japan trade deal lowers tariffs and boosts investment just days before Trump’s August 1 tariff deadline. Analysts described the agreement as the most significant in a series of last-minute deals with allies.
Japanese Prime Minister Shigeru Ishiba confirmed the 15% tariff applies to all Japanese goods. “We are the first to lower auto tariffs without volume limits,” Ishiba said in Tokyo. “This is a great achievement.”
Markets responded positively. Toyota shares surged over 12% on Wednesday. The Nikkei moved closer to 41,000 as investor sentiment climbed.
Yet economists urged caution. Chris Weston of Pepperstone Group noted strong buying in Japanese autos but warned of lingering political risks. “Traders remain hesitant about the yen due to snap election talk,” he said.
Kazutaka Maeda of Meiji Yasuda praised the timing of the tariff cut. “Avoiding 25% on autos helps Japan’s economy. But finalizing the deal earlier might’ve boosted Ishiba in Sunday’s election,” he said.
Prashant Newnaha of TD Securities also welcomed the news. “The 15% rate beats earlier threats of 24%-25%. Still, U.S. demands on rice imports could spark domestic backlash,” he warned.
US-Japan trade deal lowers tariffs and boosts investment, but political uncertainty remains. Sanseito’s rise and Ishiba’s coalition losses complicate policymaking.
Richard Kaye of Comgest highlighted that exporters already adapted. “Export prices dropped 18% last month. Still, rice imports could ease domestic shortages and inflation.”
Ma Tieying of DBS said the deal reduces uncertainty but may not lift Ishiba’s popularity. “Inflation—not tariffs—drove voter frustration,” she explained.
AMP’s Shane Oliver echoed the mixed views. “Yes, 15% is better than 25%. But it’s still high. Markets already priced in much of this.”
Currency strategist Shotaro Mori at SBI Shinsei Bank suggested the Bank of Japan may react cautiously. “The BOJ expected tariffs above 10%. If corporate earnings hold up, a rate hike could happen by October,” he said.
Carol Kong of Commonwealth Bank said the yen reacted mildly. “The JPY moved briefly but settled. Tariff relief won’t ease concerns about fiscal pressure,” she noted.
Christopher Wong of OCBC pointed to potential risks. “With tariffs settled, focus shifts to Ishiba’s leadership and credit ratings,” he said.
Charu Chanana of Saxo called the announcement a mild upside surprise. “Markets welcome the 15% rate, but $550 billion FDI seems more political than actionable,” she said.
Kristina Clifton, also from Commonwealth Bank, noted gaps in the announcement. “We don’t know specifics. Still, the 15% rate is better than Trump’s original Liberation Day threat.”
Hirofumi Suzuki of SMBC added, “This is good news for Japan. Autos at 15% is a relief. The BOJ may now consider rate hikes between September and October.”
Overall, the deal delivers relief to markets and exporters but raises new questions on trade enforcement, agriculture, and Ishiba’s political future.
