Japan’s chief trade negotiator, Ryosei Akazawa, has reaffirmed that any trade agreement with the United States must include relief from steep tariffs on Japanese automobiles, following President Donald Trump’s announcement of a 25% import duty on Japanese goods set to take effect August 1.
Speaking at a press briefing Tuesday, Akazawa said he held a 40-minute call with U.S. Commerce Secretary Howard Lutnick in which both sides agreed to “actively continue discussions” on a broad package covering trade expansion, regulatory barriers, and economic security cooperation.
“The path forward lies in trust and steady dialogue,” Akazawa stated. “My mission is to finalize a comprehensive deal as soon as possible, but not at the cost of Japan’s key industries.”
Trump’s tariff notification this week sparked global concern, but he has left the door open to delaying the measure if countries present alternative proposals. His executive order temporarily defers implementation until August 1.
While Akazawa acknowledged the looming deadline, he emphasized that Japan is not working toward any artificial timeline, and ruled out compromising Japan’s agricultural sector to secure a quick deal.
“The automobile industry is the heart of our export economy,” Akazawa stressed. “Without progress on auto tariffs, there is no deal.”
Market jitters over the tariff threat sent the dollar to a two-week high of 146.44 yen, as speculation waned that the Bank of Japan would signal an interest rate hike in its July 31 policy meeting.
“If August 1 becomes the new focus, the BOJ may remain cautious in July,” said Takeshi Ishida, strategist at Kansai Mirai Bank. “Expectations for a near-term rate hike are fading.”
Finance Minister Katsunobu Kato told reporters there are no immediate plans for talks on currency policy with U.S. Treasury Secretary Scott Bessent, as Japan continues to focus squarely on resolving the tariff dispute.
Tokyo missed a key opportunity to secure a deal before Trump’s July 9 suspension deadline, opting instead to focus its leverage on eliminating auto-related duties.
With upper house elections approaching on July 20, Prime Minister Shigeru Ishiba has pledged not to make “hasty compromises” for the sake of political optics, warning that Japanese livelihoods are on the line.
Recent polling suggests Ishiba’s ruling coalition may face difficulty maintaining a majority, raising further uncertainty over Japan’s negotiating strength.
Economists are warning that the tariff shock could push Japan’s already fragile economy into recession. The country’s GDP contracted in the first quarter, and the proposed tariffs could shave nearly a full percentage point off annual growth.
“This level of disruption would be enough to tip the economy into recession,” said Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute. “It’s a critical moment for Japan’s trade and fiscal strategy.”
