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The head of one of the most powerful business lobbies in Japan has accused the government of a “error” in its trade negotiating strategy with the US, after President Donald Trump had announced 25 percent rates at Washington’s best Asian ally.
Takeshi Niinami, Chief Executive of Suntory and chairman of the influential Japan Association of Corporate Executives, said that the insistence of Japan at a total exemption from Trump might have made the US president feel ‘betrayed’, and added that the country had a 10 percent base rate.
“They underestimate Trump’s determination,” Niinami told The Financial Times on Tuesday. “They thought the time was on the side of Japan. It was a big mistake.”
He said that Tokyo was now on a weaker foot and could be forced to make big concessions to close a deal. Niinami added that there was a narrowing window to make that deal for a higher election this month, when the ruling liberal Democratic party of Prime Minister Shigeru Ishiba runs the risk of losing power.
“It can be too late,” said Niinami.
This year, Japan was quickly initiated negotiations in the hope of protecting the rates of Trump with a Fast-Track Deal. But the US President unveiled a rate of 25 percent on land on Monday – one percentage point higher than initially announced in April – after conversations had not made any progress.
Niinamis unusually blunt comments came only a few hours after Trump had explained the new “reciprocal” tariff levels at various American trading partners in Asia, including South Korea, Malaysia, Thailand and Indonesia. The taxes, which were frozen earlier until July 9, will take effect on August 1.
HSBC said on Tuesday that Japan may find it the most difficult to offer further concessions. “The prevailing coalition of ISHIBA is under enormous pressure to protect car exporters, rice farmers and other critical constituencies prior to the controversial in the Hoge Huis on July 20,” said it.
The announcement followed weeks of apparently fruitless negotiations between Tokyo and Washington, despite claims from both parties that progress was being made. Last week Trump accused Japan of being “spoiled” because he refused to bind himself to buy more American rice or to leave cars manufactured by the US in its market.
Niinami said that Japan’s stubbornness – including the refusal of Ishiba to sacrifice the rice farmers of the country to protect the car industry – wasted the legacy of the deceased former Prime Minister Shinzo Abe, who enjoyed warm relationships with Trump during the first term of the US President.
“Trump had high expectations of Japan because of Mr Abe, [and believed] Japan could become a showcase, “said Niinami.” We had to analyze that level of expectations. “
Japan has consistently demanded an exemption from Trump’s rates, referring to the “special relationship” of the Allies. According to officials in the US and Japan, Tokyo’s trade negotiator Ryosei Akazawa, who kept several rounds of phone calls and face-to-face meetings, did not get a mandate to admit some ground.
Niinami’s criticism was reflected by David Boling, director of Japan and Asian trade in the think tank of the Eurasia Group and a former American officer who negotiated a trade agreement with Japan who came into force in 2020.
“Japan is badly calculated by taking a maximalist position that the US should eliminate all rates. That strategy was a fantasy,” he said. “If Japan wants to reach a deal by 1 August, it must be more pragmatic.”
Akazawa spoke for 40 minutes on Tuesday with the American trade secretary Howard Lutnick on Tuesday, according to Japanese officials who said that the Tokyo negotiator “permanently ready” was to fly to Washington for further conversations.
Masakazu Tokura, chairman of the Japan Business Federation, a rival business lobby group that is known locally as Keidanren, said in May that Japanese negotiators should “follow a fast but measured approach by hanging hard, digging in and negotiating with a sense of determination”.
Mitsunobu Koshiba, a director of various leading Japanese companies, suggested that Japanese groups had the ability to absorb rates because of the weak yen.
“Today I would like to take ¥ 145 in exchange for the rates,” he said, compared to the level of around ¥ 110 per dollar during the first Trump administration.
