The BGA Japan Team, led by Managing Director Kiyoaki “Kiyo” Aburaki, wrote an update to clients on the US-Japan relationship after the leaders’ meeting.

Context

  • U.S. President Donald Trump and Japanese Prime Minister Shigeru Ishiba on February 7 held a summit in Washington, D.C., that produced a joint leaders’ statement reaffirming their commitment to pursue a new golden age for U.S.-Japan relations. The summit underscored an even stronger U.S.-Japan partnership, particularly in response to China’s growing influence in both security and economic domains. 
  • Ahead of the summit, analysts in Japan raised concerns regarding Ishida’s limited diplomatic experience. However, the meeting resulted in tangible progress, including a well-defined action plan for achieving a greater trade balance between the two nations. Moving forward, U.S.-Japan cooperation in key areas such as technology and energy will be driven by the business sector. Ensuring effective alignment between policy developments and corporate strategies in both countries, while actively engaging stakeholders, will be critical for the further success of businesses.

Significance

  • The summit set a clear path for expanding and strengthening U.S.-Japan security cooperation. At the press conference following the summit, Trump emphasized that bilateral military cooperation is one of the closest security partnerships and praised Japan’s commitment to doubling its defense spending by 2027. In response, Ishiba, an expert in defense policy, asserted that Japan’s decision to increase its defense budget is a choice Japan must make based on its own responsibility, though close communication with its ally, the United States, remains essential. This statement underscored Japan’s strong commitment to reinforcing the U.S.-Japan alliance. A portion of Japan’s increased defense budget will be allocated to purchasing U.S. defense equipment, as well as joint production, development and procurement—creating new opportunities for business collaboration between the two nations.
  • The summit reaffirmed the goal that U.S. LNG and bioethanol will play a critical role in addressing the U.S. trade deficit with Japan. Japan heavily relies on LNG imports, with 43 percent coming from Australia, 24 percent from Malaysia, 9 percent from Russia, 7 percent from the United States and 6 percent from Papua New Guinea in 2023. If Japan fully replaced Russian LNG imports with U.S. LNG, it would increase U.S. exports to Japan by $4 billion (approximately ¥580 billion). Additionally, Japan’s Ministry of Economy Trade, and Industry plans to introduce premium gasoline with a 10 percent bioethanol blend by 2030, with bioethanol also expected to play a larger role in aviation fuel. 

Implications

  • Trump said that his administration would make an official statement on global tariff measures early next week. He repeatedly emphasized the phrase “reciprocal tariffs,” echoing his campaign rhetoric that “if they tax us, we tax them the same amount.” If this principle is strictly applied, the trade-weighted average tariff rate for the United States is 2.2 percent, while Japan’s is 1.9 percent. This suggests that Japan may not be a major target for additional tariffs. 
  • However, the real challenge for Ishiba remains as diplomatic success alone will have a limited impact on his approval ratings. What matters most for Ishiba is ensuring that Japan’s interests are safeguarded while fulfilling commitments made to Trump. This “Japan First with the U.S.” strategy will largely depend on business, because companies in both Japan and the United States are the primary drivers of technology development, trade and investment. When businesses proactively align their strategies with the opportunities arising from the U.S.-Japan agreements and clearly communicate their contributions to key stakeholders, they will not only strengthen Japan’s economic standing but also solidify the U.S.-Japan partnership. Most importantly, it will drive business success, ensuring long-term sustainability and growth in an increasingly complex global environment.

We will continue to keep you updated on developments in Japan as they occur. If you have any comments or questions, please contact BGA Korea Managing Director Kiyoaki “Kiyo” Aburaki
 at kaburaki@bowergroupasia.com.

Best regards,

BGA Japan Team

A small ginko leaf

Managing Director

Kiyo understands the Japanese business community inside and out from his three decades working for Japan’s most powerful business organization, Keidanren. He covers international trade and investment, defense and aerospace, information technology, entrepreneurship, deregulation and data privacy policy. He also played a leading role in developing and implementing political strategies for the private sector. Kiyo has led Keidanren’s strategic international initiatives since 2013, and most recently headed up the federation’s international engagement. He worked closely with former Prime Minister Yasuo Fukuda to establish Japan’s Track 1.5 dialogues with the United States and China. The dialogues produced important results by strengthening ... Read More