Ishiba Confronts Trumps Tariffs

Ishiba Builds His Team on Tariffs


By Takuya Nishimura, APP Senior Fellow, Former Editorial Writer for The Hokkaido Shimbun The views expressed by the author are his own and are not associated with The Hokkaido Shimbun
You can find his blog, J Update here.
April 14, 2025. Special to Asia Policy Point

After the FY2025 budget was approved on March 31, Japan’s Prime Minister Shigeru Ishiba turned to dealing with the Trump Administration tariffs. While Ishiba has been organizing his negotiating team, the opposition parties have separately been calling for policies to support businesses and households. Their policy demands are designed to garner public support for the coming Upper House elections.

Ryosei Akazawa, the Economic Revitalization Minister, was named the top negotiator. He arrives in Washington April 16 for three days of meetings with U.S. officials who include Treasury Secretary Scott Bessent and U.S. Trade Representative Jamieson Greer. Akazawa’s mission is to have the Trump administration rethink its tariff policy. He will emphasize Japan’s role as the top foreign investor in the U.S.

Ishiba also launched a task force on U.S. tariff policy, co-headed by Akazawa and Chief Cabinet Secretary Yoshimasa Hayashi, in the general headquarters on tariffs in the Ishiba Cabinet. “Under the leadership of Akazawa and Hayashi, we will construct an all-Japan organization in which the officers work on negotiation with the U.S. and measures for domestic industries beyond the border of ministries,” said Ishiba at the announcement of the task force.

Ishiba is concerned not only about trade and domestic industries but also about foreign exchange. Trump has been complaining about the devaluation of the Japanese yen against the U.S. dollar. As a founder of a hedge fund, Bessent is an expert in foreign exchange. It is likely that the exchange rate will be one of the talking points in the negotiations between Japan and the U.S. later this week. The Minister of Finance, Katsunobu Kato, will lead the currency negotiations. Kato plans to visit Washington for the annual spring meetings of the International Monetary Fund and the World Bank later in April. Although his schedule has not fixed, Kato hopes to have a meeting with Bessent during his visit.

National security is another topic. Trump reiterated that the U.S.-Japan security treaty is unfair because the U.S. pays hundreds of billions of dollars to defend Japan, but Japan does not pay anything. The Ishiba administration will explain that the Japanese government has provided extensive host nation support for the U.S. Forces in Japan. In anticipation of this discussion, Ishiba has included National Security Advisor, Masataka Okano, in the taskforce. Trump seems unaware of Japan’s constitution that prohibits engaging in non-defense war fighting.

Rice will also be a priority topic in the negotiations. “We feel like we could have more and better agricultural market access,” said Greer in pre-negotiation remarks. Because rice is the staple food in Japan, the government strictly controls the rice trade inside the country. The U.S. argues that Japan’s rice trade is not transparent and hard for foreign countries to access. Although the Japanese government is reluctant to open its rice market, the recent price hikes of rice in Japan may increase demand for foreign rice.

It is inevitable that Trump’s tariffs will have a negative impact on the Japanese economy. Beyond the “reciprocal” tariffs, the 25 percent tariffs on cars and other specific products are certain to reduce exports from Japan to the U.S. “The greatest concern is about financing of small and mid-size entrepreneurs,” said the leader of the Constitutional Democratic Party of Japan (CDPJ), Yoshihiko Noda. All political parties in Japan share a common interest in supporting business sectors.

Meanwhile, the parties are fighting over how to help households: should there be a cash handout or a tax cut? On the one hand, cash handouts could be delivered soon after the Diet passes the supplemental budget, while tax cuts would be part of the perennial debate over tax reform. A decision on tax cuts could not be made until the end of this year. On the other hand, a tax cut is more helpful for the families than a cash handout since the cut would last for several years. A cash handout is a one-time event, which has limited and temporary effects.

The parties have different views. The Liberal Democratic Party is leaning toward a cash handout in the hope of immediate effects shortly before the elections. Its coalition partner, Komeito, is urging both a handout and a tax cut. The Democratic Party for the People is promoting reduction of the consumption tax rate from 10 percent to 5 percent. Reiwa Shinsengumi wants to abolish the consumption tax entirely. Noda is reluctant to cut the consumption tax, even though some members of his party support a tax cut.

All parties are motivated to deliver an economic stimulus plan in time for the Upper House election expected to be held in July. To do so, the Diet must pass a supplemental budget by the end of the current Diet session on June 22. Passing a budget bill is hard work for a minority government. Ishiba nevertheless plans to deliver an economic policy package, which may require a supplemental budget.