Japan’s Cabinet has approved a ¥900 billion (€5.8 billion) emergency stimulus package aimed at mitigating the economic fallout from newly imposed U.S. tariffs under the administration of President Donald Trump.
The package, endorsed on Tuesday, will focus on stabilising regional businesses, easing energy costs for households, and expanding loan programmes to sustain Japan’s export-oriented economy amid growing uncertainty.
The announcement comes as Tokyo braces for further trade talks with Washington, with Chief Cabinet Secretary Yoshimasa Hayashi underscoring the need to safeguard national interests in ongoing negotiations.
“Japan’s national interests must come first in any trade negotiations,” Hayashi told The Japan News. “We need to seek an agreement that is a win-win situation for both Japan and the United States.”
The emergency outlay is Japan’s first fiscal response to the U.S. tariffs, which include a 25 per cent duty on imported passenger vehicles introduced in March. Major Japanese automakers such as Toyota and Nissan have warned of multi-billion euro losses, with some announcing plans to scale back production. Officials in Tokyo warn that such moves may severely impact the network of smaller firms supplying parts across Japan’s industrial base.
Of the ¥900 billion stimulus, approximately ¥600 billion (€3.9 billion) will be allocated to utility subsidies aimed at households affected by rising energy prices, while ¥300 billion (€1.9 billion) is earmarked for corporate support, including emergency financing for firms experiencing declining revenue due to reduced U.S. demand. Additional measures include expanded lending and insurance support through the Japan Finance Corporation.
Hayashi confirmed that the Cabinet had anticipated the economic disruption since September 2024, when signs first emerged that tariffs on Japanese auto exports were under consideration. “Japan’s direct investment in the United States is the highest of any nation,” he noted. “The government has conveyed its deep concerns that U.S. tariffs could erode Japan’s capacity to invest in the United States.”
The ¥900 billion in central government spending forms part of a wider ¥2.8 trillion (€18.3 billion) package, which includes contributions from local governments. Funding will be drawn from Japan’s fiscal 2025 reserve account—approximately ¥388 billion (€2.5 billion)—and supplemented by low-interest loans. The package builds on measures first introduced in 2023 to offset global energy shocks and is now being scaled up in light of the latest tariffs.
Critics have argued that the continuation of utility subsidies, particularly ahead of Japan’s House of Councillors election, could be seen as politically motivated. However, ministers maintain that such support is necessary to ease household pressure and prevent a broader decline in consumer spending.
The tariffs have sharpened tensions between the two countries, with Tokyo calling for a recalibrated economic relationship based on reciprocal benefits.
“What would President Trump consider to be a ‘win’?” Hayashi asked during the press briefing. “Japan and the United States should pursue cooperation that benefits both nations, including through greater investment.”
In a bid to de-escalate trade tensions, Economic Minister Ryosei Akazawa held meetings in Washington last week with U.S. officials. According to Hayashi, discussions remain “candid” and “constructive,” though no immediate resolution has been announced.
Trade experts suggest that Japan’s fiscal response may serve not only to insulate its domestic economy from near-term shocks but also to strengthen its negotiating position. The Ishiba administration, facing waning approval ratings and an uncertain external environment, is seeking to project economic stability while maintaining diplomatic engagement.
While Japanese industry leaders have called for clarity on long-term trade arrangements, short-term damage is already being felt. The automotive and electronics sectors—both heavily reliant on U.S. markets—are among the most vulnerable. Analysts warn that continued trade friction could reduce Japan’s annual GDP growth by up to 0.3 percentage points if unresolved.
Despite the challenges, Japan’s leadership continues to emphasise the importance of its strategic relationship with the United States, particularly in the Indo-Pacific. Hayashi reiterated that maintaining U.S. engagement in the region remains a central objective of Tokyo’s foreign policy. “We must ensure that Washington remains actively involved in the Indo-Pacific,” he said.
Cabinet officials are expected to begin disbursing funds from the package in the coming days, with priority given to sectors facing immediate pressure. Monitoring mechanisms will be established to assess the efficacy of the measures, particularly in regions heavily dependent on manufacturing exports.
The fiscal response underscores Japan’s broader shift towards more active economic countermeasures in the face of rising global protectionism. With trade talks ongoing and tariffs already impacting key industries, Tokyo’s stimulus aims to limit disruption while keeping diplomatic channels open.
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