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Japan emerged on Tuesday as the first major economy to secure priority tariff negotiations with Donald Trump, highlighting its status as Washington’s biggest creditor and investor and triggering a 7 per cent surge in Tokyo-listed stocks.
The equity market bounce, which almost fully reversed Monday’s broad collapse of Japanese shares, followed a 25-minute conversation between the US president and Japan’s Prime Minister Shigeru Ishiba, in which the leaders agreed to open negotiations.
After the call, Trump posted on his Truth Social platform that Japan had treated the US “very poorly” on trade. “They don’t take our cars, but we take MILLIONS of theirs. Likewise Agriculture, and many other ‘things.’ It all has to change, but especially with CHINA!!!”
Ishiba appointed his economic revitalisation minister Ryosei Akazawa as Japan’s chief negotiator for the talks, which officials in Tokyo expect to start “very soon”, reflecting the country’s need to protect its automotive industry, on which a significant proportion of the economy is built.
The US side will be led by Treasury secretary Scott Bessent, along with US trade representative Jamieson Greer. Bessent said on Fox News on Monday that he “would expect Japan would get priority as they came forward very quickly”.
Akazawa told reporters on Tuesday that Bessent’s role as head of the US delegation suggested the White House “has a strong interest in areas he oversees”.
Those remarks triggered speculation among investors that in addition to the tariffs, negotiations would also focus on the dollar-yen exchange rate, which has emerged as a source of contention for the Trump administration.
Japan, which considers itself Washington’s closest ally in Asia, was stunned last week by Trump’s announcement of a 24 per cent tariff on its imports, in addition to the 25 per cent levy on vehicles. Ishiba has called the measures a “national crisis” for Japan.
Analysts warned that the tariff burden would be disastrous for Japan, which — despite long-term investment in US-based manufacturing — profits hugely from exports and relies on relatively low-friction trade.
Ishiba reminded Trump on Monday of his country’s status as the biggest foreign investor in the US, and warned that the flow of corporate investment was at risk from the threatened levies.
Takeshi Yamaguchi, Japan economist at Morgan Stanley MUFG Securities, said US-China tensions could potentially serve as a tailwind for US-Japan negotiations.
“Japan will need to propose a package to reduce the deficit given the US administration views it as a problem,” said Yamaguchi. He suggested possibilities such as increasing imports of US agricultural products, defence equipment and energy, as well as a commitment to co-ordinating with the US in the event of excess yen depreciation.
In a further signal of US openness, Trump on Monday ordered a new national security review of Nippon Steel’s proposed $15bn takeover of Pennsylvania-based US Steel. The review, which will be led by the Treasury department, will provide a recommendation to Trump within 45 days.
Joe Biden had blocked the takeover in January in one of his final acts in office. Trump had also signalled opposition to a full takeover.
But Nippon Steel executives have been negotiating with US commerce secretary Howard Lutnick on the framework and terms of a deal in which the Japanese group would take a majority stake in the US steelmaker, according to two people familiar with the matter.
Nippon Steel’s shares rose as much as 10.5 per cent in morning trading on Tuesday.
In a statement, the company said it “looks forward to a timely resolution so that we can begin making our planned investments that will position US Steel to be a leading global steel producer”.
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