Japan Will Only Invest 2% Maximum In $550-B U.S. Fund, Tokyo Reminds Trump

Japan expects only 1% to 2% of its recently agreed-upon $550 billion U.S. fund to be deployed as direct investment, with the bulk consisting of loans, according to the country’s chief negotiator Ryosei Akazawa, Yoshiaki Nohara, Takashi Hirokawa, and Erica Yokoyama reported for Bloomberg News.

The $550 billion framework consists of a combination of investments, loans, and loan guarantees provided by financial institutions backed by the Japanese government.

Meanwhile, Tokyo expects to save roughly ¥10 trillion ($68 billion) in tariff reductions under the trade deal with the U.S., Akazawa told public broadcaster NHK.

The details revealed suggest Japan may be contributing far less than initially perceived.

The $550 billion framework consists of a combination of investments, loans, and loan guarantees provided by financial institutions backed by the Japanese government, Akazawa explained.

Of that total, only 1% to 2% will be in the form of direct investment. Profits from the investment will be split 90-10 in favor of the U.S., he said. Japan had initially proposed a 50-50 profit split.

The fund is a central pillar of the trade agreement announced by both nations, which imposes 15% tariffs on Japanese cars and other exports.

Officials in Japan and other countries involved in similar U.S. deals are now reviewing the terms to communicate them to the public.

“It’s not that $550 billion in cash will be sent to the U.S.,” Akazawa said.

“By letting the U.S. have 90% of the profits rather than 50%, I think Japan’s loss will be at most a couple of tens of billions of yen. People are saying things like ‘You sold out Japan,’ but they’re wrong.”

For the loans issued under the program, Japan will receive interest payments. For loan guarantees, Japan will collect fees as long as the borrower doesn’t default. “For that part, Japan is just making money,” Akazawa added.