- Japan urges tariff cuts on autos in US trade talks before Aug 1.
- Japan refuses to compromise on agriculture to speed up the agreement.
- Economists warn tariffs could shrink Japan’s growth by 0.7 points.
Japan's trade agreement with the US must incorporate tariff reductions for its crucial automobile sector, chief trade negotiator Ryosei Akazawa stated on Tuesday, following President Donald Trump's declaration of 25 percent tariffs on products from Japan commencing August 1.
Akazawa stated he had a 40-minute phone conversation with U.S. Commerce Secretary Howard Lutnick, during which both sides concurred to "actively" pursue negotiations.
"We are trying to agree on a package of measures" that includes increased trade, non-tariff obstacles, and collaboration on essential economic security matters, Akazawa stated during a news conference.
"The two countries must garner trust through sincere dialogue and reach common ground step by step. Through such a process, my job as negotiator is to agree on a full package as soon as possible."
On Monday, Trump started informing trade partners about significant U.S. tariff increases but later suggested he could postpone enforcement if nations presented satisfactory proposals. He signed an executive order to delay the tariffs until August 1.
Akazawa stated that Japan did not have a specific deadline, including August 1, for finalizing a deal with the U.S. and would not compromise Japan's agriculture industry for the sake of a swift agreement.
He emphasized that safeguarding the automobile industry, a cornerstone of Japan's export-driven economy facing 25 percent tariffs, was one of his highest priorities.
"There's no point striking a deal with the U.S. without an agreement on automobile tariffs," Akazawa said.
Concerns over tariffs pushed the dollar to a two-week peak of 146.44 yen amid declining hopes for a hawkish quarterly report from the Bank of Japan on July 31, which might have set the stage for a rate increase this year.
"If the new deadline is set on August 1, the BOJ probably won't be able to say much at the upcoming report in July," said Takeshi Ishida, a strategist at Kansai Mirai Bank. "Market expectations of a near-term rate hike will be rolled back."
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During a press conference on Tuesday, Finance Minister Katsunobu Kato stated that he currently has no intentions to discuss exchange rate issues with US Treasury Secretary Scott Bessent.
Japan was unable to secure an agreement with the U.S. ahead of the July 9 deadline for Trump's short-term suspension of his "reciprocal" tariffs, as it concentrated on removing auto duties.
With an upper house election on July 20, Prime Minister Shigeru Ishiba stated that Japan will not offer "easy concessions" to secure a quick agreement with Washington. Analysts say recent media polls indicate Ishiba's ruling coalition might struggle to keep a majority in the upper house, potentially complicating trade negotiations.
U.S. tariffs further contribute to the problems facing Japan's economy, which contracted in the first quarter.
"There's now a chance Japan could slide into recession," stated Yoshiki Shinke, an economist at Dai-ichi Life Research Institute, who anticipates that 25 per cent tariffs could reduce Japan's yearly economic growth by 0.7 percentage points.