TOKYO — Call it the financial bigotry of low objectives.
The first meeting between Prime Minister Shigeru Ishiba and Donald Trump on Friday ( February 7 ) is a smashing success, according to Japanese and international media outlets.
Given how few, if any, objectives did Ishiba return to Tokyo with, or any indications that some might be forthcoming, it makes for unusual headlines. Of course, in the madly turbulent Trump 2.0 era, Trump’s decision to not attack a world leader on social advertising is its own little success.
However, the US president reminded Tokyo’s social elite that Japan’s business is in Trump’s path two weeks after Ishiba visited the Oval Office.
Trump’s statement that 25 % taxes are on the way for all steel and aluminum imports , served up sounds of Japan’s knowledge during Trump 1.0 from 2017 to 2021. That was when Shinzo Abe, the then-Prime Minister, allegedly developed a strong friendship with the infamously contextual Trump.
Even now, the later Abe is frequently remembered as the” Trump whisperer”, the only president of a big politics who seemed able to tame Trump’s worst feelings. Yet this is merely half accurate, at best.
There’s no question Abe understood Trump’s needed for flattery. In November 2016, after Trump 1.0’s election win, Abe was the first earth president to jump to Trump Tower in New York for an audience. Abe also offered his support for the” America First” president in most ebullient words.
” I am convinced Mr Trump is a leader in whom I may have great trust” and” a relationship of trust”, Abe told reporters that morning.
Abe’s intuition didn’t time well. Despite Abe’s pleas, Trump exited the US-led Trans-Pacific Partnership ( TPP ), the core of Tokyo’s effort to contain China. Nor did Trump 1.0 give “friend” Abe a cancellation on steel and aluminum fees.
Complicated gifts— including Abe giving Trump a US$ 3, 800 sport team — didn’t do the trick. Nor did Abe voting Trump for a , Nobel Peace Prize. Worse, Trump boasted about the election while humiliating Abe in Liberal Democratic Party lines. And the ruling LDP was not all that happy that Kim Jong Un’s bizarre relationship with North Korean dictator Trump came at the expense of Japan’s national protection.
None of this kowtowing bought Japan little, if any, kindness from Trump. In truth, it took Ishiba completely 94 times to get an audience with Trump since November 5 — his opportunity to build an Abe-like “bromance”.
Despite the positive coverage that the Chinese and foreign media have received, Japan finds itself right in the collateral damage area. Sunday’s tax media makes that obvious enough. The fact that Trump 2.0 appears to be acting as though Ishiba’s Japan is more unnecessary than most people would like to say.
Narendra Modi’s attend to Washington this week attracted much more hype than Ishiba’s. Odd, considering Trump 1.0 had no better ally than Tokyo.
Despite its tendencies to criticize China, Trump 2.0 is most likely focused on achieving a significant Group of Two business deal with Xi Jinping, which is a part of the connect. So why is he hesitant to form a strong relationship with Ishiba.
Trump might never care because Joe Biden and Ishiba aren’t nearly as well-liked among citizens. With federal elections slated for July quick approaching, Ishiba‘s chances of keeping his work aren’t wonderful. Team Trump might not see the benefit of investing in a state that is irrational.
Either way, there’s almost no situation where Trump 2.0 goes also for Japan. On top of Trump’s levies on steel and aluminum, Japan is bracing for Trump’s comment to Taiwanese president Xi’s punitive measures following the 10 % tax Washington slapped on Beijing.
Chances are, too, that Trump’s anti-China industry experts are prodding him behind the scenes to reach Xi’s business equally hard.
On Friday, the same day he met Ishiba, Trump , declared he would immediately announce a series of mutual taxes on any number of important buying partners. Morgan Stanley economists don’t see Trump halting with only 10 % tariffs on Chinese goods as a result.
They make the argument in a word that” we also anticipate that the US will impose more tariffs on China after this year as part of its larger business goals.” That, they note, may inspire a pattern of tit-for-tat trade restrictions.
According to Oxford Economics analysts, the” trade war is in the early stages, but the likelihood of additional tariffs is high.” In order to reflect this, Oxford Economics is currently adjusting its China development direction for 2025.
That spells major problem for Japan, as Ishiba’s main trading partner faces intensifying challenges. Retail sales are struggling at house despite the Bank of Japan’s commitment to keep up with its payment strengthening.
Since Donald Trump’s return to office, the world macro environment has become more dangerous, according to Masahiko Loo, a strategist at State Street Global Advisors. The possible combination of policies put forth by the new leadership is deemed to gain the US dollar, causing the yen to suffer even more. This makes it possible for the BOJ to consider lowering the plan price difference between the US and the US, thereby reducing the chance of a second rate increase.
The BOJ’s use activity score, adjusted for traveling, fell 0.5 % in December from November. It’s a” unexpectedly poor effect”, Angrick says. Consumption of durable and non-durable goods, meanwhile, dropped , 1 % and 0.7 %, respectively. Across 2024, consumption fell 0.7 %.
The BOJ’s state that private consumption is increasing moderately is difficult to reconcile with the unsatisfactory run of data, according to Angrick. Real wages have been declining for nearly three years, straining the budgets of the households and having an impact on use. Consumption will increase with higher wages in 2025, but the treatment may take a while as inflation is still high.
This is even before Trump 2.0 introduces the taxes that major commerce officials like Peter Navarro have long advocated for in Asia. According to economists at UBS, the 60 % tariffs Trump has threatened to impose on Chinese goods had cut China’s around 5 % economic growth rate in half.
Economists advise staying objective about how little Ishiba really accomplished in Washington last week as this threat looms over Asia’s 2025 like a weapon of Damocles. This includes the unsatisfying “deal” he and Trump allegedly struck over US Steel.
Nippon Steel had been trying to acquire US Steel for about$ 14.9 billion. Previous President Biden vetoed the bargain, leaving Team Ishiba hoping Trump, Mr Art of the Deal, might say yes. To no avail. Instead, Trump said Nippon had “invest greatly” in US Steel without being granted a lot interest.
Some are reading it as a win-win for Trump and Ishiba.  ,” Trump’s wonder choice … to support a Nippon Steel funding in US Steel represents a significant win for Ishiba”, says David Boling, analyst at Eurasia Group.
Boling notes that “while the facts remain ambiguous, this statement is a better-than-expected results for Ishiba, and it will likely increase his political sitting at home in the immediate future.”
Trump, Boling adds, had met with US Steel representatives on February 6,” which perhaps paved the way for the new approach. Ishiba has been outspoken in favor of the agreement, even urging Biden to approve it near the end of his presidency, unlike his predecessor Kishida Fumio.
As such, Boling says,” Ishiba will be in a good position to claim credit for smoothing the way for a compromise, which may also help to assuage concerns by the , Japanese , business community that the US was turning against FDI”.
Others are perplexed. Jeffrey Park,  , head of alpha strategies , at Bitwise Asset Management, speaks for many when he notes:” Nippon Steel tried to buy US Steel last year but now instead found themselves investing billions into the US, which Ishiba actually spinned it as a’ successful’ meeting so then Trump sealed it with his signature kiss of a 25 % tariff”?
Ishiba is beginning a terrible year of trying to win over a US leader who is looking elsewhere. Additionally, Team Ishiba‘s decision to settle for a shadow of the deal Nippon wanted and appear to like it repeatedly causes it to be rolled over by Team Trump.
What happens, for example, when Trump demands Tokyo engage in another bilateral trade deal? Trump must be aware that the initial agreement with Abe was a failure.
The US-Japan trade agreement, which was announced on September 25, 2019, is “honored by President Donald Trump as a major breakthrough,” according to Jeffrey Schott, an economist at the Peterson Institute for International Economics, who is an expert on the subject. It actually only partially restores the advantages that Trump recklessly discarded when he pulled the United States out of the Trans-Pacific Partnership ( TPP )
This economic-bigotry-of-low-expectations problem isn’t new for Japan. To this day, many economists argue that Abe’s 2012-2020 premiership, the longest in Japanese history, was a whirlwind of disruptive reforms that ended deflation and set the nation up for a vibrant future. In reality, Japan imports a lot of its inflation because of rising global commodity prices and an undervalued yen.
So far, wage gains aren’t keeping up with inflation. According to economists, this will likely result in higher wage increases this year. In this context, according to Barclays strategist Shinichiro Kadota,” we anticipate that Japan’s annual spring wage negotiations will result in another respectable 5 % increase this year while inflation will remain above the target of 2 %,” according to Barclays.
Also, Abe – and the three prime ministers who followed – made little progress in reducing bureaucracy, internationalizing labor markets, rekindling innovation, increasing productivity or empowering women. The Nikkei 225 Stock Average reached all-time highs in 2014 thanks to the success of efforts to increase shareholder value. However, larger efforts to boost Japanese wages and increase competitivity continue to be underwhelming.
The solution is for Ishiba to resurrect reforms in order to improve Japan’s economic standing. Leaders like Trump only respect strength. Team Ishiba would be wise to develop more domestic economic muscle to restore Japan’s global relevance rather than making any moves to placate Trump or offering trade concessions that will never satisfy him.
Rather than follow the Abe playbook, Ishiba, many observers say, might be better off leaning into the “anti-Abe” persona he had long cultivated. Perhaps a little more of the same enthusiasm as that of Mexican President Claudia Sheinbaum and Canadian Prime Minister Justin Trudeau is in order. Instead of agreeing to Trump’s demands for trade concessions, both leaders are pushing back.
” Ishiba will be walking on thin ice and needs to woo Trump, but he lacks the subservient qualities that served Abe well and Trump smells desperation”, says Jeff , Kingston, head of Asian studies at Temple University’s Tokyo campus.
Accepting that Ishiba’s Oval Office visit was nothing more than a positive experience would be the first step in recognizing that Japan needs a new direction in the Trump 2.0 era. Just adds to the possibility that Tokyo will be a good choice for the upcoming trade talks.
Follow William Pesek on X at @WilliamPesek