Japan's $550 billion "big gift" to Trump is about to take effect, with the Ministry of Finance allocating $46 billion to support investment and nuclear power

The Trump administration is set to begin receiving a $550 billion "gift" from Japan, as recent reports indicate that Japan is starting to fulfill its investment commitments, with the government preparing the first batch of funding. This investment plan is a core component of this year's US-Japan trade agreement, aimed at helping Japan avoid the higher tariff threats from the Trump administration.

According to Japanese media reports on Saturday, the Japanese Ministry of Finance announced on Friday that it would provide low-interest loans and guarantees through the Japan Bank for International Cooperation (JBIC), allocating 7.18 trillion yen (approximately $45.9 billion), with part of the funds intended to support investment plans in the US. This funding is part of the Ministry of Finance's financing plan for the fiscal year 2026, which also includes financing for nuclear power plants and investments in Japan's power grid.

Before the Ministry of Finance announced the funding plan, the Japanese Ministry of Foreign Affairs issued a statement on Wednesday stating that Japan's chief trade negotiator, Minister of Economy, Trade and Industry Hiroshi Kajiyama, US Secretary of Commerce Gina Raimondo, and US Secretary of Energy Jennifer Granholm participated in a consultation group meeting held on Tuesday evening, where both sides agreed to expedite preparations to announce the first project under the strategic investment plan as soon as possible. The talks lasted about two hours.

According to a previously reached agreement, if Japan fails to provide funding for the project within 45 days after Trump makes a decision, it may face higher tariffs. Earlier this year, Trump threatened to impose a 25% tariff on Japanese goods, but after Japan agreed to increase its investment in the US through the $550 billion mechanism, the tariffs on most goods were reduced to 15%. According to CCTV News, the US and Japan reached an agreement on tariffs in July, with the US imposing a 15% tariff on Japan.

Investment Focus on Energy Sector

Wallstreetcn previously mentioned that, according to a potential project list released by Japan's Ministry of Economy, Trade and Industry on October 28, energy-related projects are the main focus of this $550 billion investment.

The list covers 21 strategic projects, including energy, AI infrastructure, and critical mineral procurement, with individual project investments ranging from $350 million to $100 billion.

Nuclear energy investments account for the largest share. The project involving Westinghouse, in collaboration with Japanese companies such as Mitsubishi Heavy Industries and Toshiba, for the construction of AP1000 nuclear reactors and small modular reactors has a total investment of up to $100 billion. Another small modular reactor project, a collaboration between GE Vernova and Hitachi, also reaches $100 billion.

Other energy projects include: Bechtel providing project management services for large power and industrial infrastructure, with amounts up to $25 billion; GE Vernova collaborating with Japanese companies to supply gas turbines and other large power equipment, with amounts up to $25 billion; and SoftBank Group providing large power infrastructure engineering services, with amounts up to $25 billion.

According to the Asahi Shimbun, the total value of the 21 projects listed in the list exceeds $400 billion, and the participating Japanese companies will receive financing and loan guarantee support from Japanese government-backed financial institutions

The U.S. Holds the Final Decision-Making Power

According to the memorandum of understanding signed by Japan and the U.S. in September this year, the investment will be screened by an investment committee led by Lutnick. Although Japan will participate in the evaluation process through a bilateral committee, the U.S. will have the final say on which projects receive funding. If Japan fails to provide funding for the investment projects selected by the U.S., Trump retains the option to restore higher tariffs.

The investment will focus on areas such as semiconductors, pharmaceuticals, metals, critical minerals, shipbuilding, energy, AI, and quantum computing, and is expected to be completed by January 19, 2029, the day before Trump's term ends. The memorandum stipulates that before Japan recoups its investment, the profits will be split evenly between the U.S. and Japan, after which the U.S. will still receive 90% of the profits.

Lutnick stated in an interview with Japanese media on October 27 that this investment framework will focus on "areas that are critical to national security and carry almost no risk," with more than half likely to be used for power and energy development. The next day, during meetings with executives from several Japanese companies on the list, he remarked, "You are just getting started; you are the foundation."