TOKYO: Japan expects only 1% to 2% of its recently agreed upon US$550bil American fund to be in the form of actual investment, with the bulk of it being loans, according to the nation’s top chief negotiator Ryosei Akazawa.
At the same time, Tokyo would save roughly 10 trillion yen through lower tariff rates in its deal with the United States, he said.
The US$550bil investment framework will be a combination of investments, loans and loan guarantees provided by financial institutions backed by the Japanese government, Akazawa said on public broadcaster NHK on Saturday night.
Of the total, investment would be worth 1% or 2% and the United States and Japan would split the profits of that investment at a ratio of 90-10, he said.
Japan had originally proposed a 50-50 ratio, he added.
The fund is the centrepiece of the deal announced by the two sides that will impose 15% tariffs on Japanese cars and other goods.
But the details given by Akazawa suggested the Japanese may end up giving up much less than at first glance.
The comments came as officials from countries with deals with the United States sift through the terms to explain to the public what they entail.
“It’s not that US$550bil in cash will be sent to the United States,” Akazawa said.
“By letting the United States 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 various things, such as ‘You sold out Japan’, but they’re wrong,” he added.
For the loans provided through the programme, Japan will simply be collecting the interest payments, and for the loan guarantees, if nothing happens Japan will also be just collecting fees, Akazawa said.
“For that part, Japan’s just making money,” he said.
Akazawa also clarified that the investment programme won’t be only supporting Japanese and US firms.
As a potential example, he cited a Taiwanese semiconductor firm building a factory in the United States.
“We’d like to put the US$550bil in place during President Trump’s term,” Akazawa added.
Further details of the implementation of the US-Japan deal remain unclear, including when the new tariff rates would take effect and when the new investment vehicle would kick off. There’s been no joint document signed by both sides for the deal, although the White House has published a fact sheet. — Bloomberg
