While the United States reached an agreement on tariffs in late July, tax rates are high, many uncertainties persist, and Japan¡¯s economic pressure has not been significantly alleviated. Several data released on September 1 showed that Japan¡¯s manufacturing industry continued to shrink in August, overseas orders decreased, while enterprises cut capital investments. The content of the agreement that has not yet been fully implemented and the hard-to-publish agreement documents are the shadow of the next Japanese economy¡¯s direction. At the same time, the dispute around ¡°Rice¡± blocked the gear of further negotiations between Japan and the United States, leading to the sudden cancellation of the trip to the United States on August 28.

Manufacturer profits decline

According to Reuters reports on September 1, the PMI (Global Japanese Manufacturing Procurement Manager Index) in August was 49.7, although higher than 48.9 in July, but lower than the initial value of 49.9 for two consecutive months below the 50th edge, indicating that manufacturing continues to be in a shrinking state. The survey showed that new orders continued to decline due to market conditions and new orders continued to decline, with new overseas orders falling at the fastest rate since March 2024. Annabelle, Deputy Economic Director of Global Market Intelligence Company, said the expansion of new exports was worrying, which was the biggest decline in half a year. Previously, Japanese government data showed the biggest decline in Japanese exports in more than four years, mainly due to a decline in U.S. autom

The survey showed that Japanese business confidence fell to a three-month low, and surveyed companies said concerns about customer demand, aging population and U.S. tariffs were the main reasons. Bloomberg cited data released by the Japanese Ministry of Finance on September 1 that said that in the three months as of June, the growth rate of non-software commodity capital expenditure slowed to 0.2% compared to the previous quarter. Significantly below the 1.3% increase in enterprise investment in the preliminary statistics of Japan's gross domestic product.

Meanwhile, the Japanese manufacturer¡¯s pre-tax profits dropped 11.5 percent from 4 to June to 11.27 trillion yen ($4.9 yuan) due to a sharp decline in profits due to U.S. tariffs, Japanese Daily News quoted analysts on September 1 as saying that the absorption of tariff costs and the reduction of sales prices by Japanese automakers became the main factor in delaying their profits. Reuters that the impact on manufacturers¡¯ profits (especially automakers) was increasing, which shaded the shadow of commercial investment as a key engine for domestic demand growth.

It is worth noting that Bloomberg reports that the $55 billion investment mechanism, a key part of the Japan-U.S. trade agreement, has raised concerns in Japan, analyzing that Japanese companies may concentrate on investing in the United States and ignore local business development.

Negotiating on the gear.

"The implementation of the trade agreement between Japan and the United States is hindered, and the rice issue remains the focus of controversy," Bloomberg on September 1, adding that in addition to the differences in understanding around the $55 billion investment, the positions of the two countries on the rice issue are also divided.

According to Japanese media, the Japanese government has received a notification from the U.S. government that it proposes to include Japan's content of increased purchases of U.S. rice in the U.S. President's executive order on tariffs on Japan. The Japanese side strongly opposes the proposal, believing that the executive order to include Japan's behavior measures in the U.S. is "interference in internal affairs."In addition, the agreement reached by the two countries in July this year has agreed not to reduce Japanese tariffs including agricultural products, so this violates the content of the U.S. tariff agreement.

According to the Japan Economic News, the issue of communication between the United States and Japan may be one of the reasons for the current chaos. The Japanese representative is responsible for tariff negotiations, but the U.S. has three representatives, namely Treasury Secretary Bessent, Commerce Secretary Lutnik and U.S. Trade Representative Gril. Luthern is mainly negotiating with Lutnik, who is considered to be the closest relationship with U.S. President Trump. According to statistics, before the agreement was reached, Lutnik was holding 15 talks (including calls) with Lutnik, and Bessent was holding seven talks with Bessent. The Japanese government has a view that the limited contact with Gril was on May 23, a total of three times. In July, Lutnik was meeting with Trump at the White House,

As the U.S. government uses the International Emergency Economic Power Act to impose tariffs on foreign countries again, Japan and other countries¡¯ negotiations with the U.S. move to or will step into a more unpredictable ¡°unknown region.¡±

Economic growth under pressure in the short term

The latest data released on Monday will be used to correct Japan¡¯s previously released GDP data for the fourth and sixth-month period, which the economy calculated at an annual rate of 1 percent, is considered to exceed expectations.But previously the Japanese government had lowered its actual growth forecast for the fiscal year 2025 from 1.2 percent to 0.7 percent, Japanese media said this part reflects U.S. tariff policies that have led to a worsening global economic outlook.

Speaking about the outlook for Japanese economy, Liu Xiaobo, a researcher at China¡¯s Institute for Modern International Relations, said in an interview with a reporter at the Global Times that Japan could undergo a small amount of economic growth pressure in the short term, and the third quarter is expected to slow the growth rate to 0.8%. He said that the 15% tariff rate reached by Japan and the United States is relatively advantageous in the global horizontal comparison, but the potential risk point of the Japanese economy is in the exchange rate field, if the U.S. interest rate is reduced, even if the central bank of Japan keeps the interest rate unchanged, the Japanese-U.S. interest gap will sharply shrink, meaning that Japan¡¯s relative interest rate rises, will squeeze out profit space for export enterprises.