Japan to invest $45b in US projects under Trump deal

TOKYO – Japan plans to invest US$36 billion (S$45.5 billion) in US oil, gas and critical mineral projects, the first tranche of its US$550 billion commitment under the trade agreement it struck with US President Donald Trump.  

“Our massive trade deal with Japan has just launched!” Mr Trump posted on Feb 17 on social media. “The scale of these projects is so large, and could not be done without one very special word, tariffs.”

The most significant investment is a natural gas facility in Ohio that is expected to generate 9.2 gigawatts of power, according to a statement from Commerce Secretary Howard Lutnick, a massive project that Mr Trump described as “the largest in history”.

Japan is expected to invest US$33 billion in the gas plant, which will be led by SoftBank Group subsidiary SB Energy, the Wall Street Journal reported, citing anonymous Commerce Department officials.

If the plant operates at full capacity, it would be the equivalent of nine nuclear reactors or roughly the amount of power consumed by about 7.4 million homes on the largest US grid operated by PJM Interconnection. 

The second project is a deepwater crude export facility in the Gulf of Mexico, according to Mr Lutnick. Mr Trump, earlier in his social media post, offered a different description, saying the investment would cover a liquefied natural gas facility off the coast of Texas.

A spokesman for Sentinel Midstream said the Texas GulfLink facility under development is a crude oil export project. 

Japan is also expected to invest in a synthetic industrial diamond manufacturing facility, which Mr Trump’s post indicated would be located in Georgia. The diamonds are a “critical input for advanced industrial and technological production”, Mr Lutnick said.

The Journal reported that the project would receive a US$600 million investment and would involve Element Six, a subsidiary of De Beers.

The long-awaited announcement marks a step forward for the trade and economic pact that Mr Trump announced with Japan in 2025. It comes weeks before Japanese Prime Minister Sanae Takaichi is set to meet Mr Trump in Washington. 

The selection comes after a joint panel first met in December to consider projects, which are ultimately selected by Mr Trump himself based on recommendations from an investment committee he established, along with input from Japanese officials. 

The fund is meant to spur a wave of Japanese investment in key US industries and was a central pillar of the tariff deal, under which the US leader agreed to set levies of 15 per cent on Japanese products and lower the duty for automobiles, a critical driver of Japan’s economy. 

Implementation of the agreement is likely to be a top agenda item during the meeting between Mr Trump and Ms Takaichi in Washington, expected to take place on March 19.

Mr Lutnick and Japanese Trade Minister Ryosei Akazawa met in Washington last week to hash out the details of the first tranche of investments. Mr Akazawa said he does not expect projects backed by the US$550 billion fund to be high-risk, high-return, signalling that the Japanese are seeking initiatives with safe returns, rather than less-certain investments.

“Japan is providing the capital. The infrastructure is being built in the United States. The proceeds are structured so Japan earns its return, and America gains strategic assets, expanded industrial capacity and strengthened energy dominance,” Mr Lutnick said in his Feb 17 statement. 

The initial investment in a power generation facility is timely. Soaring demand from new data centres, especially to chase the artificial intelligence (AI) boom, has raised the cost of ensuring adequate energy supplies.

The two nations identified potential projects ranging from US$350 million to as much as US$100 billion during Mr Trump’s visit to Japan in 2025. That framework included energy, AI and critical minerals investments involving SoftBank, Westinghouse and Toshiba, among others.

The government-owned Japan Bank for International Cooperation and Nippon Export and Investment Insurance are expected to play leading roles in financing the projects. It is not yet clear how much money will be committed in the form of direct investment.

Mr Akazawa said in 2025 that only 1 per cent to 2 per cent of the US$550 billion mechanism would consist of cash investments, with the majority coming from loans and loan guarantees.

After a selection is made, Japan has 45 business days to fund the effort, according to an agreement between the countries. If Japan elects not to fund a project, the US could claw back certain revenues or reimpose tariffs, according to the agreement. That could risk significantly higher duties on Japanese imports into the US.

Mr Trump threatened to raise tariffs to 25 per cent, but scaled that back to 15 per cent after Japan agreed to boost investment in the US through the US$550 billion fund.

The US leader has grumbled about the pace of implementing a similar deal with South Korea, a key competitor with Japan in auto manufacturing, and threatened to hike tariffs once again. That saga underscores the link between the investment pledges and the tariff changes that accompanied them. 

The announcement follows a historic electoral victory for Ms Takaichi earlier in February and comes as Parliament formally re-elected her as prime minister on Feb 18. She has vowed to prioritise strong ties with the US. Mr Trump has praised Ms Takaichi, wishing her “great success” in her “conservative, peace through strength agenda”.

Dr William Chou, a senior fellow at the Hudson Institute, said the three projects reflect shared US and Japanese priorities in the energy, AI and semiconductor sectors and were a good match for the Japanese industry’s skill sets and understanding of the US industrial landscape.

“This announcement ensures political momentum ahead of Prime Minister Takaichi’s trip to Washington next month, and demonstrates that Japan is an ally that follows through on its promises,” Dr Chou said. BLOOMBERG