Japanese Media: Japan Prepares Fallback Options Ahead Of Third Round Of US-Japan Tariff Negotiations

Following two consecutive rounds of failed trade talks between Japan and the United States, Nikkei Asian Review reported on the 17th that Japanese negotiators have signaled a shift in strategy: abandoning their initial demand for complete tariff elimination by the U.S. and instead accepting partial tariff reductions.

The report indicates that the two governments plan to hold a third round of negotiations after this week's G7 Finance Ministers and Central Bank Governors meeting in Canada. Japan's chief trade negotiator, Akira Amari, Minister for Economic Revitalization, will revisit the U.S. as Tokyo finalizes its negotiating positions.

A dedicated task force on U.S. tariffs convened at the Prime Minister's Office on the 15th to prepare for the upcoming talks, according to Nikkei. The third round will focus on three areas: expanding bilateral trade, non-tariff measures, and economic security cooperation. Japan is formulating sector-specific fallback plans, including increased imports of U.S. agricultural products (notably corn and soybeans), special measures to boost American auto imports, and proposed collaboration in shipbuilding under economic security.

On the 16th, Japan's Vice Foreign Minister Takeo Mori met with U.S. Deputy Secretary of State Christopher Landau in Washington. Though tariffs were not the primary agenda, Mori emphasized Japan's desire to reach a mutually beneficial agreement with U.S. diplomatic support.

The Financial Times analyzed that despite Japan being America's largest foreign investor and key Asian ally, Prime Minister Shigeru Ishiba's earlier hopes for a prioritized trade deal were overtaken by faster U.S. agreements with Britain and China. Nikkei noted fundamental differences: Britain maintains a trade surplus with the U.S., while China and the U.S. had imposed tariffs exceeding 100%. Japanese METI officials stressed that outcomes from U.S.-UK and U.S.-China talks "cannot serve as reference points" for Japan-U.S. negotiations.

Japan faces a structural dilemma: its top exports to the U.S.-autos and auto parts-remain under American tariffs, leaving increased agricultural imports as Tokyo's primary bargaining chip. However, this risks angering Japan's politically influential farming lobby ahead of July's Upper House election. The ruling Liberal Democratic Party (LDP), having lost its Lower House majority, cannot afford another electoral setback.

A Japanese official acknowledged that reaching a deal before July's election is unlikely, with current efforts focused on quality outcomes rather than speed. Reports suggest Japan has proposed linking the percentage of U.S. tariff reductions to Japanese investment levels in America.

Notably, divergences have emerged among Japanese leadership. While PM Ishiba continues advocating for "full tariff elimination," Minister Amari recently called for "reassessing" U.S. tariffs-a nuance interpreted as Ishiba pursuing maximal gains versus Amari's openness to compromise.

The negotiations underscore Japan's delicate balancing act between economic pragmatism, domestic political pressures, and preserving its strategic alliance with Washington.