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Weekend Reads
President Donald Trump’s recent visit to Japan has reinforced the United States’ most important bilateral relationship. As China becomes more militarily aggressive, the United States and Japan are more aligned than ever on security—and their groundbreaking August trade agreement promises to transform their economic partnership.
A $550 Billion Commitment to American Industry
The centerpiece of the August agreement is Japan’s pledge to invest $550 billion in US industry—a game-changing commitment that deserves more attention than it has received.
In September, Japanese Finance Minister Katsunobu Kato outlined the specifics: most funding will flow through the Japan Bank for International Cooperation (JBIC), which traditionally supports projects in the developing world. The newly created Japan Strategic Investment Facility—a JBIC subsidiary that will operate from October 2025 through the fund’s planned end date of March 2029—will target 10 critical sectors: semiconductors, pharmaceuticals, steel, shipbuilding, critical minerals, aviation, energy, automobiles, artificial intelligence, and quantum.
Expert Insights on Maximizing Impact
To further explain the deal’s details and how Washington and Tokyo can most effectively use this strategic fund to advance their industrial and technological leadership, Hudson’s Kenneth Weinstein and William Chou hosted two panels of financial, industrial, and policy experts. The key takeaways from the event are below.
Watch the event, listen to the podcast, or read the transcript here.
Key Insights
1. Firms need to receive long-term commitments to rebalance markets away from China.
“What is happening in the rare earth space is an easily replicable formula, just as what’s happening in the semiconductor space. . . . You will need to think strategically about what sectors in the supply chain you’re going after. And then folks need to step off the sidelines and actually sign agreements. It’s not enough to just say, I have a relationship with the supplier. Well, that supplier’s not going to stay in business if that supplier doesn’t have an offtake agreement. So it’s got to be a long-term commitment on rebalancing the market. It doesn’t have to be a total decoupling, but I think there needs to be a significant rebalancing.”
— Reese Goldsmith, Head of Government Affairs, Ara
2. China’s recent economic coercion reveals why this fund is so essential.
“We just went through essentially six weeks of economic coercion, blackmail, whatever you want to call it, by the [People’s Republic of China] over rare earth minerals, as well as legacy semiconductors for automobiles, right? We just experienced that. . . . They will continue to use these coercion weapons until they are no longer effective. And so if you assume that that is the case, then we have a lot of things that we have to work on to ensure that we are no longer coerced—both ourselves as well as our closest allies. And so if you look at it that way, the number of projects that we need to invest in, there’s no shortage of them.”
— William Chou, Senior Fellow and Deputy Director, Japan Chair
3. The initiative needs to be transparent, predictable, and stable to spur large, long-term investments.
“Sectors identified—like semiconductors, energy, AI, critical minerals, shipbuilding, and others—they require long-term capital commitments. Japanese companies will need to carefully assess feasibility, especially in areas like shipbuilding where industrial competitiveness must be strengthened and domestic capacity constraints remain a challenge given shipbuilding’s strategic importance from a national security point of view. The Japanese government and the businesses are already engaged in an active discussion [on] how to address these issues. . . . Transparency, predictability, and sustainability of government support will be essential. So we hope this framework not only catalyzes new investment, but also recognizes the decades of effort Japanese companies have made to build and maintain a resilient, innovative ecosystem across the United States. We look forward to working with our American partners to ensure this initiative strengthens our shared industrial base and delivers lasting value for both economies.”
— Teruko Wada, Executive Director, Keidanren USA
Quotes may be edited for clarity and length.
Go Deeper
On CNN, William Chou discusses what to expect from new Japanese Prime Minister Sanae Takaichi and the importance of President Trump’s trip to Tokyo.
Kenneth Weinstein delivered the keynote address at the Institute of Geoeconomics’ 2025 summit in Tokyo. He discussed American foreign policy and the world order, as well as the future of US-Japan defense, technology, and trade relations. David Feith took part in a panel at that same summit to discuss semiconductor export controls, artificial intelligence, and other key intersections of economic and national security.
In a Hudson brief, William Chou explains key elements of the $550 fund and what they mean for Washington.
