Although Japan and the United States reached an agreement on tariffs in late July, high tax rates, many uncertainties remain, Japan’s economic pressure has not been significantly eased. Japanese manufacturers continued to contract in August as a result of US tariffs, with overseas orders falling and companies cutting back on capital investment, according to data released on September 1. The contents of the agreement, which has not yet been fully implemented, and the document, which is difficult to release, cast a shadow over the direction of Japan’s economy. Meanwhile, the dispute over“Rice” has stalled further negotiations between Japan and the US, led to Japan’s Minister for Economic Regeneration, Japan’s chief trade negotiator Akazawa Liang is August 28 suddenly canceled the trip to the United States. Bloomberg, Sept. 1(Bloomberg) — the latest spat over Rice reflects the difficulty of actually implementing a trade deal with the United States even after a trade deal is reached.
The manufacturer’s profits plunged
The S & P Global Manufacturing Purchasing Managers’ index for August was 49.7, up from 48.9 in July but below the initial reading of 49.9, Reuters reported Sept. 1, two consecutive months below the 50 growth and contraction line, indicating that the manufacturing sector continues to be in a state of contraction. New orders from overseas continued to fall at the fastest pace since March as market conditions 2024, the survey showed. Annabelle, Deputy Director of Economics at S & P Global Market Intelligence, said the widening decline in new exports was particularly worrisome, the biggest in a year and a half. The move came after government data showed that Japanese exports fell by the most in more than four years in July, mainly because of a fall in car exports to the US and a sharper-than-expected fall in industrial production.
Business confidence among Japanese companies fell to a three-month low in the S & P survey, with concerns about customer demand, population ageing and US tariffs cited as the main reasons. In the three months to June, growth in capital spending for goods other than software slowed to 0.2 percent from the previous quarter, Bloomberg reported Sept. 1, citing data released by Japan’s finance ministry on the same day. This is significantly lower than the 1.3% increase in corporate investment in the preliminary GDP statistics of Japan. The report said the tariffs were putting pressure on exporters, raising concerns that their profitability and ability to raise wages could be hurt.
Meanwhile, Japanese Manufacturers’ pre-tax profits plunged 11.5 per cent year-on-year in the april-june period, hit by a sharp drop in profits caused by US tariffs, to 11.27 trillion yen (100 yen) . The Japanese automaker’s ability to absorb tariff costs and lower selling prices has been a major drag on its profits, the Nikkei said Sept. 1, citing analysts. The impact on the profits of manufacturers, particularly carmakers, is intensifying, casting a shadow over business investment as a key engine of domestic demand growth, Reuters reported.
Japanese manufacturers’ pre-tax profits plunged 11.5 per cent year-on-year between April and June. Above, workers work on an assembly line at an auto interior assembly plant in Hiroshima, Japan, on July 14. (IC photo)
Notably, Bloomberg reported that the $550 billion investment mechanism, a key part of the japan- trade agreement, has caused concern in Japan, the analysis suggests that Japanese companies may focus on investing in the U. S. and neglect local business development.
The rice jammed the negotiation gears
“The rice issue remains a controversial issue as Japan and the United States struggle to implement a trade agreement,” Bloomberg reported Sept. 1 in the headline, adding that in addition to differences of understanding surrounding the $550 billion investment, the two countries also differ on rice.
According to Japanese media reports earlier, the Japanese government has received the U. S. Government Notice, proposed to increase the purchase of U. S. Rice in the U. S. president’s executive order on tariffs against Japan. Japan strongly opposed the proposal, saying that the Japanese actions into the U. S. executive order is“Interference in internal affairs.”. In addition, the July agreement between Japan and the United States had agreed not to lower Japanese tariffs, including on agricultural products, thus violating the terms of the japan-us tariff agreement. Akira Ryo is August 28, the cancellation of the original visit to the United States plan is understood to be related to this.
“Japan Economic News” analysis, japan-us government communication problems may be one of the reasons for the current confusion. Akazawa is the Japanese representative in charge of the tariff negotiations, but the US has three representatives, finance secretary basent, Commerce Secretary Lutnik and US Trade Representative Greer. Akira is mainly in talks with Lutnik, who is thought to be closest to President Donald Trump. According to statistics, before reaching an agreement, Akazawa Liang is Lutnik had 15 talks (including phone calls) , and Besant had 7 talks. Akazawa’s last meeting with Greer was on May 23, a total of three times. In July, Greer was absent from Akira’s White House meeting with Donald Trump, in which Beckett and Rutnik were present. There is a view within the government that Greer’s limited engagement with the Japanese contributed to the current turmoil.
Negotiations between Japan and other countries could move into more unpredictable“Uncharted territory” as the US government is again found guilty of using the International Emergency Economic Powers Act to impose tariffs.
Economic growth is under pressure in the short term
The latest figures, released on Monday, will be used to revise Japan’s gross domestic product figures for April-june, which showed the economy grew at an annualised rate of 1 per cent in the quarter and was seen to beat expectations. But the Japanese government had previously cut its forecast for real growth in fiscal 2025 to 0.7 per cent from a previous estimate of 1.2 per cent, which Japanese media said partly reflected the worsening global economic outlook caused by US tariffs.
Referring to the outlook for the Japanese economy, Liu Junhong, a China Institutes of Contemporary International Relations researcher, said in an interview with the global times that the country may suffer from a small amount of pressure on economic growth in the short term, growth is expected to slow to 0.8 per cent in the third quarter. He said the 15 per cent tariff rate finally agreed by Japan and the US was relatively favourable in a global horizontal comparison, but the potential risk to the Japanese economy was in the currency area and if the US cut interest rates, even if the BOJ kept rates unchanged, interest rate differentials between Japan and the US would also shrink sharply, meaning higher relative interest rates in Japan would squeeze exporters’ profit margins.