The EU Japan Centre is releasing a weekly press review covering Japan's economic and policy matters.
▶ Toyota shipping US cars to Japan among ideas to avoid Trump tariffs
7 July, 2025
Japanese automakers are exploring ways to reduce Japan’s trade imbalance with the U.S. amid pressure from President Trump, who may raise auto tariffs to 35% unless a deal is reached by July 9. Ideas include importing U.S.-made Toyotas back to Japan or selling American cars through Japanese dealerships. Despite zero import tariffs in Japan, the U.S. claims non-tariff barriers exist. Japanese automakers are responding by raising U.S. prices and boosting local production. With Japan’s upper house election on July 20, trade talks may extend beyond the deadline.
▶ Japanese, British, Italian Defense Ministers Discuss Fighter Jet Project
8 July, 2025
Defense ministers from Japan, Britain, and Italy held a trilateral videoconference to reaffirm their commitment to jointly developing a next-generation fighter jet. The three countries have invested capital in the project and recently established a joint venture called Edgewing, which will oversee the fighter’s design and related tasks. During the meeting, the ministers agreed on the need to accelerate progress and plan to finalize contracts between Edgewing and the Global Combat Air Program International Government Organization (GIGO) by the end of the year. This partnership is expected to streamline and simplify the collaborative development process.
Yomiuri: https://japannews.yomiuri.co.jp/politics/defense-security/20250708-268486/
▶ Alaska natural gas pipeline project eyes start for Asian customers
8 July, 2025
The Alaska LNG project, led by U.S.-based Glenfarne, is a ¥4.4 trillion initiative aiming to start gas supply in 2028 and LNG exports by 2030–2031. With an annual production capacity of 20 million tons—about 30% of Japan’s annual demand—Japan is seen as a key export market. A 1,300 km pipeline from northern Alaska to Anchorage is the project's core challenge. Japanese companies are expected to show interest in investment, and the project could contribute significantly to Japan’s energy security.
Nikkei Asia: https://asia.nikkei.com/Business/Energy/Alaska-natural-gas-pipeline-project-eyes-start-for-Asian-customers
▶ Japan Launches Body to Foster Female Digital Experts
8 July, 2025
Japan has launched a public-private consortium led by Wakako Yata to promote the development of female digital experts. The group aims to help women gain digital skills to increase their wages and contribute to regional revitalization. The initiative seeks to boost productivity in small regional businesses by leveraging digital technology and empowering women to play active roles in their communities.
Jiji: https://jen.jiji.com/jc/eng?g=eco&k=2025070800262
▶ Japan's rare-earth imports from China plunge to 5-year low
9 July, 2025
Japan’s imports of Chinese rare earths fell 72.4% year-on-year in May to their lowest level in over five years, due to China’s export restrictions amid U.S.-China trade tensions. While cheaper light rare earths remain accessible, medium and heavy rare earths are harder to obtain, affecting industries like auto manufacturing. Japan is increasing recycling efforts and aims to produce rare earths domestically by 2028 to reduce reliance on China.
Nikkei Asia: https://asia.nikkei.com/Spotlight/Supply-Chain/Japan-s-rare-earth-imports-from-China-plunge-to-5-year-low
▶ Japan's uncertain wage trends cloud outlook for PM Ishiba and BOJ
9 July, 2025
Japan is facing high inflation and U.S. trade tariffs, which are impacting both the July 20 upper house election and the Bank of Japan’s (BOJ) efforts to normalize monetary policy. Despite recent large nominal wage hikes due to labor shortages, real wages continue to fall, hurting living standards. Political parties, including Prime Minister Ishiba's ruling LDP, are pledging cash handouts and tax cuts to address voter concerns. The LDP promises 20,000 yen per citizen (more for children and low-income earners), and long-term economic goals like raising average income by 50%. The BOJ has delayed rate hikes amid weak domestic demand and trade uncertainty, keeping rates unchanged for three meetings. A rate rise in October is still possible, but could be delayed until 2026 if tariff issues persist. The election outcome will influence whether citizens receive direct benefits or tax relief, but cooperation between ruling and opposition parties remains essential for any progress.
Nikkei Asia: https://asia.nikkei.com/Politics/Japan-election/Japan-s-uncertain-wage-trends-cloud-outlook-for-PM-Ishiba-and-BOJ
▶ Japan uses generative AI less than U.S., China, Germany
9 July, 2025
A Japanese government survey shows low adoption of generative AI in Japan compared to the U.S., China, and Germany. Only 26.7% of individuals in Japan reported using generative AI, versus 81.2% in China, 68.8% in the U.S., and 59.2% in Germany. Among Japanese companies, 55.2% use generative AI, far below the 90%+ in the other countries. Top reasons for not using AI in Japan include it being "not necessary" (40.4%) and "not knowing how to use it" (38.6%). Nearly 30% of Japanese firms said AI had no significant business impact, compared to less than 10% in the other nations.
Asahi: https://www.asahi.com/ajw/articles/15895237
▶ The 26th ASEAN Plus Three Foreign Ministers’ Meeting
10 July, 2025
On July 10 in Kuala Lumpur, Japanese Foreign Minister Takeshi Iwaya attended the 26th ASEAN Plus Three Foreign Ministers’ Meeting. He emphasized the growing importance of ASEAN+3 cooperation in regional economic stability, food security, and disaster risk reduction. Iwaya highlighted Japan’s support for the ASEAN Community Vision 2045 and stressed the need for a rules-based international economic order, strengthening financial safety nets, and addressing challenges like aging populations and organized fraud. He also called for the complete denuclearization of North Korea and expressed concerns over its missile development and military ties with Russia. Japan reaffirmed its commitment to deepen cooperation with ASEAN+3 countries and continue trilateral talks with China and Korea.
MOFA: https://www.mofa.go.jp/a_o/rp/pageite_000001_01111.html
▶ Japanese carmakers slash export prices to U.S. to offset tariff hit
10 July, 2025
Japanese automakers have slashed export prices to the U.S. by a record 19.4% in response to 25% tariffs imposed by President Trump, aiming to stay competitive but at the cost of profit margins. This strategy raises concerns about their ability to sustain wage growth, a key factor for the Bank of Japan’s inflation goals. Despite some price increases by companies like Subaru, the overall trend reflects efforts to limit consumer impact. Car export value to the U.S. fell 24.7% in May, while volume dropped only 3.9%, highlighting the price-cutting approach. Broader producer price growth also slowed in June to 2.9%.
Japan times: https://www.japantimes.co.jp/business/2025/07/10/companies/japan-carmakers-export-price-cut/
▶ Iwaya Conveys Concern over China's Rare Earth Curbs
10 July, 2025
Japanese Foreign Minister Takeshi Iwaya met with Chinese Foreign Minister Wang Yi in Kuala Lumpur and expressed strong concern over China's rare earth export restrictions, which are impacting Japanese companies. Iwaya urged faster approval of export permits, while Wang said exports would proceed if rules are followed. Both ministers also reaffirmed their commitment to strengthening bilateral relations.
Jiji: https://jen.jiji.com/jc/eng?g=eco&k=2025071001035
▶ Honda scraps EV SUV development due to decreased US demand
5 July, 2025
Honda has canceled plans to develop a large electric SUV, originally set for a 2027 U.S. launch, due to slowing EV demand and rising costs. The move is part of a broader strategy shift, with Honda cutting its EV investment target from ¥10 trillion to ¥7 trillion by 2030. Instead, the company will focus on expanding its hybrid vehicle lineup, aiming to release 13 hybrid models and sell 2.2 million units by 2030. This follows similar moves by Ford, Nissan, and Toyota, all of whom are scaling back EV plans amid market uncertainty and changing U.S. policies.
▶ Vertical solar panels set to alter the look of Japan’s farmland
6 July, 2025
Vertical solar panels, known as agrivoltaics for their dual use of farmland, are poised to transform Japan’s agricultural landscape. Installed by Sharing Farm in a rice paddy in Tochigi Prefecture in May 2024, these panels reduced the rice yield by only 5%. The electricity generated is sold to Marubeni Power Retail. Unlike horizontal panels, vertical ones allow easier use of farming equipment and generate power from both east- and west-facing sides, especially during high-demand morning and evening hours. They are also more resistant to snow and can harness reflected light, making them ideal for snowy regions. The Japan Photovoltaic Energy Association predicts a 20-30% annual growth in vertical solar panel installations.
Asahi: https://www.asahi.com/ajw/articles/15857326
▶ MHI Awarded Contract for Basic Design of Japan's Largest CO₂ Capture Plant at Hokkaido Electric Power's Tomato-Atsuma Power Station
7 July, 2025
Mitsubishi Heavy Industries (MHI) has been commissioned by Hokkaido Electric Power to design a CO2 capture plant for the Tomato-Atsuma Power Station, capable of capturing 5,200 tons of CO2 daily. This plant, expected to be Japan’s largest, will capture emissions for storage in deep saline formations near Tomakomai, aiming to store up to 2 million tons of CO2 annually by 2030. The project aligns with Japan’s first designated CO2 storage area under the CCS Business Act. As part of its goal to achieve carbon neutrality by 2040, MHI is focusing on developing carbon capture, utilization, and storage (CCUS) technologies to support global greenhouse gas reduction efforts.
MHI: https://www.mhi.com/news/25070701.html
▶ Japan, UK firms seek to build 'world's first' floating data center
8 July, 2025
Mitsui O.S.K. Lines has partnered with UK-based Kinetics to develop the world’s first offshore data center powered by a powership, aiming to begin operations in 2027. A used cargo ship will be converted starting in 2026, with plans for larger future versions. The floating data center addresses land-based space and power constraints, especially as demand grows with the rise of generative AI.
Nikkei Asia: https://asia.nikkei.com/Business/Technology/Japan-UK-firms-seek-to-build-world-s-first-floating-data-center2
▶ Japanese Solar Panel Makers Eye Business Opportunities after Ordinance Mandates Installation on New Houses
8 July, 2025
Japanese solar panel makers are responding to new mandates by Tokyo and Kawasaki requiring solar panels on new homes by developing innovative products and cost-saving systems. Sharp introduced panels that reduce light reflection, suited for Japan’s space-limited urban homes, while Panasonic offers a program letting homeowners install panels without upfront costs through a power purchase agreement. Despite these efforts, Japanese manufacturers face strong competition from low-cost Chinese panels, which now dominate the market. Experts suggest Japanese firms should focus on design, reliability, and meeting specific local needs to stay competitive.
Yomiuri: https://japannews.yomiuri.co.jp/business/companies/20250708-268359/
▶ Japan's Inpex weighs Indonesia hiring spree for $20bn LNG project
9 July, 2025
Japan’s Inpex is pushing forward with the $20 billion Abadi LNG project off Yamdena Island, Indonesia, aiming to produce 9.5 million tons of LNG annually by the early 2030s. Partnering with Pertamina and Petronas, Inpex plans to begin construction in 2027 and hire around 10,000 workers. The project is set to become a major revenue source, reducing Inpex’s reliance on its Australian operations.
Nikkei Asia: https://asia.nikkei.com/Business/Energy/Japan-s-Inpex-weighs-Indonesia-hiring-spree-for-20bn-LNG-project
▶ Hitachi develops “Metaverse Platform for Nuclear Power Plants” to enhance efficiency in construction and maintenance operations
9 July, 2025
Hitachi has developed a new “Metaverse Platform for Nuclear Power Plants” that uses metaverse and AI technologies to improve operations like safety, maintenance, and construction. The platform creates a virtual replica of nuclear plants using precise 3D data, enabling better information sharing, schedule coordination, and asset management among stakeholders. It supports multi-user collaboration, AI-powered document search, and engineering tools, all within a secure environment. This platform aims to help build a “Data-Driven Power Plant” for predictive maintenance and efficient decision-making, addressing challenges like workforce shortages and knowledge transfer in the nuclear industry.
Hitachi: https://www.hitachi.com/New/cnews/month/2025/07/250709.html
▶ Japanese venture capital firm targets 'deep tech' unicorns
10 July, 2025
Japanese venture capital firm Jafco Group plans to launch its largest-ever fund of around 100 billion yen ($684 million) by early 2026 to support domestic startups, especially in deep tech areas like AI, space, and nuclear fusion. Jafco will contribute 20% of the fund, with the rest from overseas investors and financial institutions. It aims to invest 400–500 million yen per startup, with flexibility for high-potential companies. Jafco will sell its overseas subsidiaries to focus on Japan. The move aligns with a broader shift in Japan's startup scene from internet businesses to capital-intensive deep tech, amid a 35% rise in venture capital investment since 2019.
Nikkei Asia: https://asia.nikkei.com/Business/Finance/Japanese-venture-capital-firm-targets-deep-tech-unicorns
▶ Japan's smaller chip assemblers join up to cut costs, share data
11 July, 2025
Japanese companies involved in back-end semiconductor processing have formed a new industry group, J-OSAT (Japan OSAT Association), to boost competitiveness and reduce production costs by up to 20% through collaboration and equipment upgrades. The group, launched in April with about 30 member companies employing 15,000 people, aims to share data, automate processes, and develop the workforce. Back-end processing — which includes cutting wafers into chips and packaging — is becoming increasingly important as front-end advances slow. The global back-end market is expected to grow 73% to $79.9 billion by 2030. Japan's sector, mainly composed of small and mid-size firms, has fallen behind global leaders like Taiwan’s ASE Technology due to underinvestment and outdated equipment. J-OSAT seeks government subsidies and plans to create a shared production database to improve efficiency and resilience, especially in light of economic security concerns.
Nikkei Asia: https://asia.nikkei.com/Business/Tech/Semiconductors/Japan-s-smaller-chip-assemblers-join-up-to-cut-costs-share-data
Published: September 2025
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