[Text/Observer Network Chen Sijia] After U.S. President Donald Trump announced his tariff policy, Japan quickly initiated negotiations with the United States in an attempt to "reach a trade agreement first." However, due to their failure to reach consensus on issues such as automobile and steel and aluminum tariffs, the Japanese political and business circles strongly opposed any agreement that might jeopardize national interests. As a result, the Japanese government had no choice but to change its stance and began to "negotiate" with the United States.

According to a May 20 report by Reuters, Japan's chief trade negotiator and Minister of Economic Revitalization Akira Akazawa stated at a press conference that Japan will insist on requesting the United States to cancel the tariffs and will not support any trade agreement that harms Japan's interests. Akazawa is expected to head to Washington this week, possibly meeting with U.S. Trade Representative Greer on May 23 for the third round of negotiations.

Akazawa said at the press conference: "The series of tariffs imposed by the United States, including 'reciprocal tariffs' and tariffs on automobiles, automotive parts, steel, and aluminum, are regrettable. Our position of seeking the revocation of all tariffs has not changed."

He stated that Japanese and U.S. officials held working-level trade talks in Washington on the 19th, and the time for the third round of ministerial-level negotiations has yet to be determined.

The English-language Japan Times indicated that it has been unclear what stance Japan will take in the next round of negotiations. Officials repeatedly called for the United States to "reconsider" these measures. This ambiguous expression could be interpreted as Japan being somewhat willing to compromise. However, Akazawa completely clarified this point, confirming Japan's tough stance.

"I have no disagreement with the Prime Minister in understanding," he continued, "my position from the beginning of the negotiations has not changed: we consider these measures regrettable and require them to be reconsidered — that is, we hope they will be canceled."

Japanese Minister of Economic Revitalization Akira Akazawa Visual China

According to reports by Kyodo News Agency, Akazawa is expected to visit Washington this week, possibly holding the third round of trade negotiations on May 23. It is anticipated that U.S. Trade Representative Greer will participate in the talks, while U.S. Treasury Secretary Beasant will not attend.

Previously, sources told Reuters that the timing of the third round of negotiations depends on the progress made by Japanese and U.S. officials during working-level talks. One source mentioned that Japan is considering a comprehensive proposal, potentially exchanging increased imports of American corn and soybeans, cooperation on shipbuilding technology, and modifications to import automobile safety standards for tariff exemptions from the United States.

As a close ally of the United States, Japan faces a "reciprocal tariff" rate of 24%, far exceeding market expectations. Although Trump has announced a temporary suspension of the "reciprocal tariff," products exported from Japan to the United States still face a 10% unified tariff and a 25% tariff on automobiles, which has severely impacted Japan's export-oriented economy, heavily reliant on automobiles.

However, Japanese officials revealed that considering that the latest election for Japan's House of Councillors must be held no later than late July, the unpopular Shigeru Ishiba administration needs to focus on the election. Therefore, it is unlikely that an agreement will be reached before the election. This means that the tariff negotiations between the two countries may drag on until early July when the 90-day suspension period for the "reciprocal tariff" ends.

Prime Minister Shigeru Ishiba initially hoped to "quickly" complete negotiations with the United States, such as reaching a trade agreement around the G7 summit in June. However, both the Japanese business community and members of the ruling party oppose any agreement that might endanger the automobile industry or farmers' interests. As a result, the Ishiba administration had to adjust its strategy and engage in "negotiations" with the United States.

A senior official directly involved in the Japan-U.S. negotiations stated: "Although Japan was once eager to become the first country to negotiate tariffs with the United States, this sense of urgency has now shifted, focusing instead on ensuring that Japan reaches a favorable agreement."

The Japan Times pointed out that tariff negotiations may determine the fate of the Ishiba administration. If the current session of the Diet is not extended, the schedule for the House of Councillors election is likely to be "July 3rd announcement, July 20th voting," with voters evaluating the administration's performance in the negotiations through the election. Therefore, to salvage its precarious approval ratings, the Ishiba administration hopes to reach an agreement to cancel the tariffs.

Reportedly, if Japan fails to obtain tariff exemptions through negotiations or if the United States refuses to revoke the already implemented automobile tariffs, the approval ratings of the Ishiba administration will inevitably suffer, and the Japanese economy may also be affected. If the ruling Liberal Democratic Party loses a significant number of seats in the House of Councillors election, internal movements within the LDP to remove Ishiba may accelerate further.

The Financial Times also noted that in last October's House of Representatives election, the coalition government led by Prime Minister Shigeru Ishiba's Liberal Democratic and Komeito parties lost their majority status for the first time in 15 years. Reaching an agreement that damages domestic industries could further deepen Ishiba's governance crisis.

Nicholas Smith, a Japanese strategist at CLSA, stated that automobile exports accounted for 81% of Japan's trade surplus with the United States in the previous fiscal year. "Japan's stance has become more assertive. Ishiba is fighting for his and his party's political survival and cannot easily give up."

Bloomberg estimated that major Japanese automakers could lose over $19 billion due to the U.S. tariff policies. Toyota Motor Corporation, which leads global sales, will be the most affected. Last week, Toyota stated that due to the tariffs, revenue would decrease by 180 billion yen ($1.2 billion) in April and May alone. According to Bloomberg Intelligence estimates, Toyota's total loss for the fiscal year could reach $10.7 billion. Some forecasts predict losses ranging from $5.4 billion to $6.8 billion for the entire year.

Smith bluntly stated: "If Prime Minister Ishiba cannot secure tariff reductions for automobiles, he is essentially walking toward a conveyor belt leading to a revolving blade." It is worth noting that the impact of the tariff shock has not yet fully manifested. Japanese Cabinet data released on the 16th showed that Japan's GDP contracted quarter-on-quarter in the first quarter of this year, marking the first negative growth in a year.

In addition, the Japan Times highlighted that the issue of rice imports has become a critical factor influencing the LDP's electoral prospects. LDP officials stated that, considering the House of Councillors election, even if Japan agrees to increase imports of American corn and soybeans, "we cannot make concessions on rice."

Japanese Prime Minister Shigeru Ishiba Visual China

Currently, Japan's official stance remains consistent in demanding the United States to cancel all new tariffs, including the 25% tariffs on automobiles and steel and aluminum, as well as the "reciprocal tariffs" on other goods. On the 19th, Ishiba stated in the Japanese Diet that Japan will not harm its own interests due to time constraints and will continue to seek exemptions from all additional U.S. tariffs.

An article published by The Nikkei Asia on the 20th pointed out that according to trade data, Japan had a $62 billion trade surplus with the United States in the fiscal year 2024, making it highly unlikely for Japan to eliminate the surplus solely through increased imports of American cars and agricultural products.

The Nikkei Asia estimated that to increase imports by $62 billion, Japan would need to purchase an additional 965,000 American cars. However, Japan imported only about 13,000 passenger vehicles in the fiscal year 2024, requiring an increase of 72 times to meet the requirement. Currently, American cars account for less than 1% of new car sales in Japan and are not popular in the market. Even if Japan modifies the import safety standards for American cars, achieving this figure will be difficult.

In terms of agricultural products, if Japan were to offset the surplus solely by increasing imports of rice, it would need to import 64 million tons of American rice in a year, nearly 190 times the current level, equivalent to approximately eight years of production and consumption domestically. If relying solely on increased corn imports, Japan would need to import nearly 23 million tons of corn in a year to offset the surplus, which is more than 18 times the projected import volume for the fiscal year 2024 and equivalent to Japan's consumption for 15 years.

Alternatively, Japan could reduce exports to lower the trade surplus. The Nomura Research Institute estimated that if the United States does not cancel the automobile and steel and aluminum tariffs and imposes a 24% "reciprocal tariff" on Japan, Japan's export value would decrease by $29.7 billion, reducing the trade surplus by about half, but also causing Japan's GDP to decline by 0.7%.

If Japan combines increased imports and reduced exports to eliminate its trade surplus with the United States, GDP could decline by up to 1.4%. Therefore, The Nikkei Asia believes that eliminating the trade surplus is very difficult for Japan and faces "significant obstacles."

Takashi Kinoshita, an economist at the Nomura Research Institute, warned that eliminating the surplus through increased imports would have a significant impact on Japan's economy. "The Japanese government should not make major concessions lightly." He predicted that the U.S.-Japan trade negotiations may continue to drag on. "For the United States, the pain caused by tariffs on Japan is far less than that caused by tariffs on China. Therefore, the United States has little motivation to make concessions to Japan and seek an early agreement."

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Original source: https://www.toutiao.com/article/7506534752179077658/

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