Lashing himself to the mast
Ishiba raises the domestic stakes after the second round of talks with the US
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While reports of the breakdown in US-Japan trade negotiations are exaggerated, the Ishiba government’s tone following Thursday’s ministerial-level talks between Japanese chief negotiator Akazawa Ryōsei and US Treasury Secretary Scott Bessent, Commerce Secretary Howard Lutnick, and Trade Representative Jamieson Greer suggests that not only are the two governments far apart, but the Ishiba government is not rushing to conclude an agreement for its own sake.
According to the Nikkei Shimbun, the Trump administration reportedly presented Akazawa with a draft framework Thursday that excluded the newly imposed 25% tariffs on automobiles, steel, and aluminum from discussion, the tariffs that Akazawa has indicated are the Ishiba government’s highest priorities in negotiations. Despite this gap, the two governments will continue holding working-level talks on Friday and will hold a third ministerial session in mid-May.1 There are aspirations that Prime Minister Ishiba Shigeru and President Donald Trump could meet on the sidelines of the G7 summit in Alberta in mid-June and announce a broad framework that would structure more concrete discussions that would perhaps wait until after Japan’s upper house elections, expected to be held on 20 July.
Nevertheless, it is perhaps more important what the Ishiba government is signaling to domestic audiences. Ishiba has had to walk a tightrope in these negotiations, signaling to the United States that he is negotiating in good faith in pursuit of an agreement that preserves a good relationship while signaling to a restive public that Japan is not engaged in “tribute diplomacy” and will not be bullied into sacrificing its national interests by the Trump administration. Following Thursday’s negotiations, Ishiba, far from preparing the public for a quick agreement, is telling the public that he is no rush to conclude an agreement.
As Ishiba told the press after receiving Akazawa’s report:
It's not better just because it's faster. For us, while properly asserting our national interests, it's not good to reach an early conclusion by sacrificing such interests. We are both negotiating with our national interests at stake, so we will both make maximum efforts to find points of agreement. I don't think it's appropriate to mention specific timing. While sooner is better, it is of course natural that the content should not harm our national interests for the sake of prioritizing speed.
Meanwhile, in a separate television appearance Friday, Ishiba stressed that Japan “absolutely cannot swallow” automobile tariffs. In short, Ishiba is hoping to use his domestic audience to reduce his room for negotiating maneuver. Having communicated to the public – with upper house elections looming – that automobile tariffs are unacceptable for Japan, the prime minister has made it substantially more difficult to accept a US proposal that does not sharply reduce or scrap the 25% tariff on automobiles, lashing himself to the proverbial mast.
Even as Ishiba was telling the Japanese people that he will not sacrifice Japan’s national interests, his finance minister Katō Katsunobu was communicating a message about Japan’s resolve to domestic and foreign audiences. In an interview with TV Tokyo on Friday morning, Katō said that Japan’s holdings of US Treasuries – according to the Ministry of Finance totaling USD 1.27tn as of March – could be a “card” in negotiations.
Katō was quick to suggest that whether and how to play this card — the so-called “nuclear option” — was a separate matter entirely. Arguably Katō’s message was not a realistic threat to divest from US Treasuries, but rather another way of communicating that Japan is serious about defending its national interests in the trade talks and will not be bullied into giving the Trump administration the kind of one-sided agreement discussed in the Council of Economic Advisers chair Stephen Miran’s musings about a Mar-a-Lago accord.
In this sense, the most important thing that Katō said Friday was that Japan “does not hold Treasures to support the US but managing them while considering liquidity if it becomes necessary to intervene [in foreign exchange markets].” In short, Katō asserted that Japan is watching out for its own interests and is not negotiating out of a sense of obligation or charity towards the US.2 While this message was not tied to a particular red line, the message to both the Trump administration and the Japanese public is that the Japanese government is not going to concede easily in negotiations.
Thus, as the negotiations continue, Tokyo and Washington appear to be playing a game of chicken. Ishiba’s government is prepared to have constructive discussions about some of the US government’s concerns about market access, but it will not — and, with its messaging to domestic audiences, increasingly cannot — be seen as giving these concessions away too lightly. Of course, Ishiba is unlikely to break off negotiations but he appears willing to wait out the Trump administration, perhaps reasoning that Trump’s falling approval ratings, adverse market reactions, or the self-inflicted pain of the administration’s tariffs could all result in a more amenable deal for Japan.
He may have also been quietly pushing back against Miran’s idea of having major holders of US Treasuries convert their holdings to longer maturities.