[By Guancha Observer Network, Shao Yun]

According to a May 16 report by the Financial Times of the UK, despite Japan's initial hope to quickly complete tariff negotiations with the US, under domestic political pressure, the Japanese government has begun to adopt a tougher stance. In the third round of negotiations expected to be held in late May, the Japanese government is likely to seek more favorable terms for Japan, including the complete elimination of car import tariffs, rather than seeking to quickly conclude an agreement.

"Although Japan was very eager to become the first country to negotiate tariffs with Washington, this sense of urgency has now shifted, and the focus has become ensuring that Japan secures a good agreement," a Japanese official reportedly directly familiar with the negotiation situation told the report.

A second Japanese official familiar with the negotiations said that cars and automotive parts are Japan's most important export products to the US. "This means that the US-Japan negotiations must address the issue of car tariffs. If we cannot make progress in this area, I believe we will not be able to reach any consensus."

According to a May 15 report by the Nikkei Shimbun, Japan and the US are expected to begin working-level consultations next week. The specific time is expected to be after Treasury Secretary Bessent concludes the G7 finance ministers and central bank governors meeting in Canada on the 22nd and returns home. Economic Regeneration Minister Akizawa will travel to the US after both sides have confirmed the schedule.

On May 15, Akizawa was interviewed by the media after attending a working group meeting on US negotiations and support for domestic industries at the Prime Minister's Office. Photo from Japanese media.

However, Japanese officials believe that it is unlikely that a deal will be reached between Japan and the US before the upper house election in July. The Financial Times pointed out that in last October's House of Representatives election, the Liberal Democratic Party and Komeito ruling coalition led by Prime Minister Shibamuro lost its majority for the first time in 15 years; if they were to reach an agreement that harms domestic industries, it could further deepen Shibamuro's governance crisis.

It is reported that Japan's basic negotiating position is to request the US to fully cancel all additional tariffs, including the 25% tariffs on imported cars, steel, and aluminum products, as well as the 24% so-called "reciprocal tariffs" (of which 10% is the benchmark rate newly set by the US in April and has not been suspended).

To this end, the strongest card Japan can play in the negotiations will be expanding purchases of American agricultural products, increasing market access for American cars, and investing in the Alaska LNG pipeline project in the United States. However, Shibamuro reiterated in the House of Representatives on the 12th that he cannot accept an agreement without including the automotive sector and will not sacrifice agriculture for the automobile industry to expand imports of American rice as a bargaining chip.

"Japan's stance has become stronger. Shibamuro is fighting for his and his party's political survival and cannot easily give up," said Nicholas Smith, a Japanese strategist at CLSA. He pointed out that car exports accounted for 81% of Japan's trade surplus with the US last year.

Bloomberg statistics on the 15th show that major Japanese automakers are expected to lose over $19 billion due to US tariff policies. Toyota, the global sales leader, will be hit first. Last week, Toyota said that affected by tariffs, its revenue would decrease by 180 billion yen (US$1.2 billion) just in April and May. According to Bloomberg Intelligence estimates, Toyota's loss for the entire fiscal year could reach up to US$10.7 billion. Some forecasts predict Toyota's annual loss to be between US$5.4 billion and US$6.8 billion.

Smith bluntly stated, "If Prime Minister Shibamuro cannot secure tariff reductions for automobiles, he is essentially standing on a conveyor belt approaching a rotating blade." It is worth noting that the impact of tariff shocks has yet to materialize. Data released by the Cabinet Office on the 16th showed that Japan's GDP contracted quarter-over-quarter for the first time in a year in the first quarter of this year.

Currently, it remains unclear how much influence Japan can exert on US White House decision-making. The Financial Times analysis suggests that Japan relies on the US for security protection but maintains a trade surplus with the US, which makes President Trump unhappy. Trump previously criticized Japan for deliberately depressing the yen exchange rate to gain a trade advantage through exports. The report believes that this makes the negotiations more complex.

"The problem facing Japan is that, in principle, it does not want to conclude an agreement that appears hastily formulated. But at the same time, it cannot count on the US having the patience to reach a detailed agreement," said the aforementioned Japanese official who is "directly familiar with the negotiation situation."

Local time on February 7, 2025, Trump meets with Shibamuro. Visual China.

Kyodo News disclosed earlier this month that in the second round of US-Japan negotiations regarding the Trump administration's "reciprocal tariffs," the US side not only refused to cancel the 25% tariffs on cars and steel/aluminum products but also clearly stated that the unified 10% benchmark rate would not be part of the negotiation agenda, limiting discussions to a 14% reduction in "reciprocal tariffs," making it clear that Japan would not receive special treatment.

According to a May 14 report by the Daily Yomiuri, to soften the Trump administration's stance on car tariffs, the Japanese government is considering an "old strategy": importing cars produced by Japanese manufacturers back into Japan. Additionally, there are reports that one of the early proposals put forward by Japan was linking the amount of investment by Japanese companies in the US with the percentage of tariff reductions granted by the US side.

However, in the view of Stephen Nagy, a professor of politics and international relations at International Christian University, Japan, the above strategies are based on the assumption that the US places more emphasis on its security partnership with Japan than on tariffs, but this may not be the case in reality. "I think Japan will eventually realize that Trump insists on maintaining the basic tariff framework. No matter what Japan says or does, it cannot escape this reality," Nagy said.

Nevertheless, some analysts believe that a so-called "win-win" agreement between the US and Japan is possible. An article on the Foreign Policy website on the 12th claimed that the final agreement might highlight symbolic concessions from the Japanese side in its publicity but quietly ensure that the agreement has little impact on Japan's economy or its exporters in the details.

The article also mentioned that Japan still holds a "trump card" in the negotiations, namely the 1.126 trillion US dollars in US Treasury bonds it holds. Finance Minister Kato previously said that "all options, including intentional sales of US bonds, are not ruled out," then later retracted by saying "it is not believed that selling US bonds is a means of US-Japan negotiations." The article considers this to be a form of "fuzzy tactics."

This article is an exclusive contribution by the Observer Network and cannot be reproduced without permission.

Original source: https://www.toutiao.com/article/7505028484830347828/

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