U.S. President Trump has signed an executive order officially implementing the U.S.-Japan trade agreement. Over the past two days, details of one of the agreement's core components—Japan's massive $550 billion investment commitment to the United States—have gradually emerged.
According to reports on September 6th, after months of negotiations, Japan secured lower automotive tariffs from the United States, but the implementation of Japan's promised $550 billion investment will be subject to President Trump's discretion.
Reports indicate that if Japan fails to deliver on its investment commitments, the U.S. could even raise tariffs. Analysis suggests this increases the possibility of both countries returning to the negotiating table.
Notably, Japanese Prime Minister Ishiba Shigeru suddenly announced his resignation from the Liberal Democratic Party leadership position on the evening of September 7th. When Trump was asked about this development, his reaction was lukewarm, stating only "I know nothing about it."
On September 4th, the same day Trump signed the executive order, U.S. Commerce Secretary Lutnick and Japan's Minister for Economic Revitalization and Chief Trade Negotiator Akazawa Ryo signed a memorandum of understanding in Washington, outlining the $550 billion investment plan and operational details.
"The President has complete discretion over where these investments flow," Lutnick stated in an interview with CNBC. He mentioned that the $44 billion Alaska liquefied natural gas pipeline project is among the candidate projects.
Other potential investment areas include semiconductors and pharmaceuticals. According to Japanese media disclosures, the memorandum of understanding indicates that if Japan fails to fulfill its investment commitments, the U.S. can impose additional tariffs. Reports suggest this arrangement would leave Japan "at Trump's mercy."
Under the memorandum of understanding, Japan's $550 billion investment must be completed by January 19, 2029—exactly one day before Trump's current presidential term ends. Trump will establish an investment committee led by Lutnick and composed solely of U.S. officials, which will recommend projects to Trump.
Before making recommendations to Trump, the investment committee will first communicate with an advisory body composed of representatives from both the U.S. and Japan, expected to include representatives from the Japanese government, Japan Bank for International Cooperation (JBIC), and Nippon Export and Investment Insurance (NEXI), who will review investment projects according to Japanese laws and regulations.
Reports indicate that in principle, the investment committee will award projects and service orders to Japanese companies. According to Japanese government officials, if a power plant is to be built in the United States, the required components will be manufactured by Japanese companies; if the project is a semiconductor factory, that facility will also use production equipment and materials made in Japan.
The memorandum of understanding does not specify how Japan will raise the funds. Tokyo previously indicated that JBIC and NEXI would provide investments, loans, and loan guarantees.
According to Trump's previous statements, the U.S. would receive 90% of the profits from Japan's $550 billion investment. However, the memorandum of understanding shows that before Japan recovers its investment, both countries will split profits equally, after which the U.S. will still receive 90% of the profits. A Japanese official revealed that the U.S. investment will be conducted through non-recourse lending, meaning repayment depends on future revenues generated by the borrowing projects.
Reports note that U.S. cooperation is crucial for advancing projects. The United States will provide the land, water, electricity, and other infrastructure needed for projects, and will find buyers for goods.
"This takes time, but we fundamentally believe there's no possibility these loans will become bad debts that cannot be recovered," said a Japanese government source.
Under the memorandum of understanding, Japan has the right to refuse to provide all or part of the funding for a particular project, but the U.S. can take retaliatory measures by imposing additional tariffs on Japanese imports. The memorandum reportedly states that as long as Japan continues to faithfully implement these projects and provide funding, the U.S. will not raise tariffs.
Reports indicate that if problems do arise with projects, they will first be discussed in the advisory body. A Japanese government source stated that for projects where the U.S. and Japan have already reached consensus in the advisory body, the possibility of Japan not providing funding is extremely small.
Reports also mention that the memorandum of understanding is viewed as a consensus between the U.S. and Japanese governments and is not legally binding.
On September 4th local time, the White House issued a statement saying President Trump signed an executive order formally implementing the U.S.-Japan trade agreement.
The statement indicated that under the agreement, the U.S. will impose a 15% baseline tariff on almost all Japanese imports entering the United States. Japan will provide breakthrough market access openings for U.S. manufacturers, aerospace, agriculture, food, energy, automotive, and industrial goods producers in key sectors. Additionally, the Japanese government agreed to invest $550 billion in the United States.
Notably, Trump's executive order contains a provision authorizing the U.S. President to modify the executive order if Japan fails to fulfill its commitments.
"During the Trump administration, we don't know what will happen next," lamented a senior Japanese economic official.
Reports note that the U.S.-Japan trade agreement that took effect in 2020 was a legally binding agreement approved by Japan's Diet. However, the current Trump administration has effectively abolished that agreement and raised tariffs, violating the previous agreement.
According to Reuters, Akazawa Ryo stated on September 6th that a broader trade agreement between Japan and the United States remains "undetermined."
"While the President has issued orders regarding adjustments to general tariffs as well as automotive and auto parts tariffs, presidential orders regarding most-favored-nation treatment for pharmaceuticals and semiconductors have not yet been issued. Therefore, it cannot be said that this issue has been resolved," Akazawa said. He indicated that Tokyo will continue pushing for the remaining U.S. executive orders to be issued.
Regarding Lutnick's claim that Trump has "complete discretion" over the flow of Japanese investment funds, Akazawa denied this characterization.
He stated that Trump will select from projects proposed by the U.S. investment committee, and these projects are proposed through U.S.-Japan consultations. He emphasized that Japan will participate in selecting projects that use Japanese funds.
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