The main headlines to start the day is that Japan has struck a trade deal with the US. The gist of it is that auto tariffs will be reduced to 15% as Japan also pumps $550 billion of investments into the US. This will come as Japan makes concession on agriculture, one that they have been drawing a hard line for months, agreeing to accept more rice from the US. And also as part of the deal, Japan will be allowed to participate in a joint venture on Alaska LNG exports.
But what about reciprocal tariffs? In Trump’s tweet, he says that it will be set to 15% but it remains to be seen if that is misconstrued by the Japanese side as to mean auto tariffs or all tariffs. There’s still no firm details yet.
All that being said, none of this might matter at all.
The important thing to remember coming into this is that Japan prime minister Ishiba is under heavy pressure back home in Tokyo. After suffering another defeat in parliament last week, he has seen his mandate and governing powers be significantly weakened. As a reminder, the ruling coalition lost control of the upper house of parliament for the first time since 1955.
That’s a major blow to Ishiba, not just in terms of confidence vote, but it also highlights how there is likely going to be a political gridlock in Tokyo until he decides to step down.
So after having talked up such a tough stance against the US for three months, why the sudden change in heart to offer a concession on agriculture to make a deal?
This looks to be a last ditch attempt by Ishiba to try and stave off pressures of a no confidence vote and also calls for him to resign. The thing is, he still might end up having to go anyway before all this is said and done.
As a reminder, any agreements and accords struck by the government will still need ratification and approval by the Japan’s parliament. And given the circumstances, Ishiba is very much a lame duck now so one can expect policymakers to put his head on the chopping block before agreeing to anything that he wants to put through in the National Diet.
So yes, the headlines may seem encouraging for now. However, the reality of the situation is that what we’re seeing is just a last ditch attempt by Ishiba to stay relevant and one that might not work at the end of the day.
This article was written by Justin Low at investinglive.com.