Japan–US Trade Deal Lowers Tariff Pressure but Economic Risks Persist, Cabinet Report Warns
Japan announced that its newly signed trade agreement with the United States has eased some of the uncertainty surrounding American trade policy, particularly around tariffs. Under the deal reached last week, U.S. tariffs on Japanese goods — especially cars — were reduced to 15% from a previously proposed 25%. The Cabinet Office stated this adjustment relieves some pressure on Japan’s export-driven economy, though concerns remain about broader trade policy impacts.
Despite the lowered tariffs, Japan’s Cabinet Office noted that export prices for automobiles bound for the U.S. have significantly declined since April. However, the report highlighted that export volumes, manufacturing price indexes, and employment figures have not shown major changes as a result. Officials downplayed the immediate risk of a downturn, crediting a range of U.S. trade agreements for helping stabilize global trade conditions.
While Japan’s government maintained its broader economic outlook as a “moderate recovery,” it urged caution moving forward. Officials emphasized that risks from U.S. trade policy still pose potential threats to Japan’s economic trajectory and must be closely monitored. “The risk of a downturn remains,” a Cabinet Office official said during a press briefing.
The July report also included a downgrade in Japan’s export assessment, the first such revision in a year. This was largely attributed to declining exports of semiconductor manufacturing equipment to Taiwan and South Korea. The change reflects the ripple effect of shifting global tech demand, impacting one of Japan’s high-value industrial sectors.
The report revised its outlook on domestic corporate goods prices, now saying growth is “slowing down” rather than “gradually rising” as noted in June. This change was driven by energy subsidies and moderating food price increases. On the brighter side, private consumption, which makes up over half of Japan’s economy, continues to show signs of improvement, offering a buffer against external trade shocks.
Source: Reuters