Japan’s pledge to channel up to $550 billion into the US economy under its trade agreement with Washington is encountering early frictions, as officials on both sides work through differences over where the funds should be deployed.
Japanese trade minister Ryosei Akazawa acknowledged on February 12th that “significant gaps” exist in priorities of the two sides, even as they continue efforts to identify the first projects under the framework.
“There were still areas where significant gaps remained. Nevertheless, we were able to see further progress,” said Japanese trade minister Ryosei Akazawa on February 12th, while addressing media reporters in Washington on the sidelines of his talks with the US Commerce Secretary Howard Lutnick.
The investment package — agreed in July 2025 in exchange for lower US tariffs on Japanese exports — is intended to support the US economic growth and strategic industries, while allowing Japan to secure tariff relief for its goods.
However, while a memorandum of understanding (MoU) has mapped out broad sectors for funding, officials are still far from agreeing on which specific projects qualify and how they should be structured.
Under the deal, Tokyo committed to invest up to US$550 billion in the US economy by the end of 2029. That timeframe aligns with the remainder of the US President Donald Trump’s current term in office.
These funds are to be provided in several forms, including direct equity investment, low-cost loans, and loan guarantees underwritten by state-backed institutions such as the Japan Bank for International Cooperation (JBIC) and Nippon Export and Investment Insurance (NEXI).
A key purpose of the funding is to back projects that strengthen industrial and economic ties between the two countries and reinforce critical US, including semiconductor chips, energy, pharmaceuticals, metals and shipbuilding.
But the reality on the ground is proving harder to shape. While the US government envisions robust, high-impact projects, Tokyo has stressed that the final list must meet strict risk and profitability criteria for Japanese participants, making many proposals contentious.
Akazawa said that he and his American counterpart in the investment negotiations, Lutnick, “confirm every time we meet that participating Japanese and American companies must be able to earn solid profits and absolutely not suffer losses” while further adding that “there won’t be high-risk, high-return ventures,” reflecting Tokyo’s discomfort with deals perceived as onerous.
One technical disagreement, as described by Akazawa, involves how to evaluate projected interest rates and returns on prospective investments, a calculation that can dramatically affect which projects are deemed feasible.
“Because of that, the talks have become extremely tough. I cannot say at this point when or what kind of projects will be finalised,” Akazawa said, noting that negotiators are working toward tangible progress ahead of Prime Minister Sanae Takaichi’s planned visit to the United States.
There is perhaps a related controversy even on the expected composition of the package.
Akazawa has previously said that Japan expects that only a small share of the total, potentially as little as 1 % to 2 % in direct cash investment, will be deployed as pure equity, with the remainder structured as loans and guarantees.
However, this expectation contrasts with President Trump’s remarks that publicly framed Japan’s pledged investment as “our money to invest, as we like”, suggesting US direction over the use of funds and the desire for clear, deployable capital impact.
The selection process also gives Washinton significant influence over project choice. Under the investment framework, a US investment committee chaired by the US Commerce Secretary is expected to recommend projects, with a joint consultation body of American and Japanese designees advising on priorities, meaning Japan can only advise on investment priorities.
Also, at the time of the tariff deal announcement, some Japanese companies had expressed caution about participating in the program, pointing to uncertainties over project timelines, regulatory compliance and return expectations, while stating the need for clarity on investment breakdowns before making commitments.
Overall, as negotiations continue, Japan and the United States face a tight timeline to finalize project lists and move from planning to execution. A series of technical committee meetings, involving Japanese ministries and state-backed finance agencies, have been underway to prepare for the formal launch of investment initiatives.
Per the reports, both sides appear to be moving toward naming initial investments. Reuters reported in January that a shortlist of possible projects includes one involving data-centre construction with participation from the SoftBank Group, a major Japanese conglomerate involved in technology infrastructure.
That shortlist of candidates is said to be part of ongoing negotiations aimed at formalizing the first deal ahead of a high-level visit by Japanese Prime Minister Sanae Takaichi to the United States in the spring this year.
Tanmay Kadam is a geopolitical observer based in India. He has experience working as a Defense and International Affairs journalist for EurAsian Times. He can be contacted at tanmaykadam700@gmail.com.