Japan As A Global Bulwark Against Illiberalism Under Trump 2.0

Summary:

During Donald Trump’s first presidency, Japan supported the liberal international order by playing a leading role in the conclusion of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, after the United States’ withdrawal from the process and introducing the concept of the Free and Open Indo-Pacific.

Japan and the rest of the world now face a wave of populism and illiberalism from the second Trump administration which threatens civil society, human rights protections and democratic norms globally. Amid this upheaval and responding to calls to play a greater role in international security, Japanese Prime Minister Shigeru Ishiba and his administration are reconsidering Japan’s part in protecting democratic values and institutions on the international stage.

In an interview with the Nikkei Shimbun in March 2025, Jack McConnell of the British House of Lords expressed his expectation that Japan would participate in the coalition of the willing led by the United Kingdom and France in support of Ukraine. Japan’s major media continue to send messages that Japan should work with European countries for Ukraine and beyond. Underlying this proactive interest in the security sphere is a concern that the ceasefire between Ukraine and Russia brokered by the Trump administration may give too much ground to Russia’s claims, undermining relations between Europe and the United States and increasing the likelihood of China attempting to take Taiwan by force.

To prevent disruption of peace and stability, it is vital that Japan expand its security partnerships while making sure that the United States—its one and only alliance partner—maintains its security commitments in Asia. In this, Japan has had some rare success.

At a meeting with Japanese Minister of Defense Gen Nakatani in March 2025, US Secretary of Defense Pete Hegseth reaffirmed the importance of the US–Japan security alliance and declared US intentions to strengthen the military command in Japan. Although the United States called on Japan to increase its financial contribution to the alliance, this commitment was a stark contrast to the Trump administration’s hints of loosening its commitments with European allies.

Initially cautious, the Ishiba administration has begun actively strengthening its security partnerships. In addition to additional agreements with Ukraine in support of energy sector recovery and the country’s economic health, the Japanese government has continued to show its commitment to rules-based international order on occasions such as the NATO Foreign Ministers’ meeting and the Japan–UK 2+2 economic meeting.

Japan’s moves have been more proactive in the Indo-Pacific, where the stakes are high. Tokyo and Manila have committed to conclude a general agreement on security of information as soon as possible and to begin negotiation of an acquisition and cross-service agreement, leading Ishiba to state that Japan and the Philippines have become ‘partners close to an alliance’. An agreement in principle has been reached on the provision of Japanese defence equipment and official defence consultations with Vietnam, and Japan has also agreed to expand and deepen joint drills with India. Several members of the governing Liberal Democratic Party have also travelled to Taipei and reconfirmed bilateral cooperation on maritime security.

Japan is following the same pattern in the economic realm. When Trump introduced the idea of ‘reciprocal tariffs’, the Japanese government initially refrained from taking any action to defend the liberal international economic order despite expectations that Japan go beyond protecting its own economy by supporting free trade. Yoji Muto, Japan’s Minister of Economy, Trade and Industry, initially flew to Washington to get a tariff exemption rather than objecting to their imposition as an infringement of international trade law completely, but this stance changed in April 2025.

When Ryosei Akazawa, the Minister in charge of Economic Revitalization who took over Japan–US tariff negotiations, visited Washington on 3 May, he argued that the United States should also reduce existing tariffs on items such as automobiles, auto parts, steel and aluminium in addition to abolishing the newly imposed ‘reciprocal’ tariffs. As the first country to negotiate on Trump’s tariffs, Japan set the tone for the international community in not readily conceding the arbitrary measures taken by the United States.

Further afield, current and former Japanese prime ministers and cabinet members have been visiting countries across Asia, the Middle East, Europe and Africa to discuss the future of the free trade system and demonstrate commitment to free trade with these countries. In an unprecedented development, more than 70 per cent of Japan’s cabinet members travelled abroad for such talks during the long holiday week beginning in late April.

An even stronger voice for a free and open international order has been heard from Japanese media outlets which are closely analysing Trump’s moves. Shogo Akagawa, Editor-in-Chief of the Nikkei Shimbun, is even calling for Japan to be ready to carry the banner of democracy, rule of law and free trade in face of a potential US withdrawal from the G7.

An advantage that the media, has compared to the government, is its ability to analyse critically the Trump administration’s moves against the liberal international order. While the Japanese government is concerned about Trump’s actions in both the security and economic realms, its posture remains diplomatic. The sharper criticisms of the media add an important layer to the government’s messaging, as Japan works to buttress free and open international order.

This perspective needs to be heard clearly internationally. The Japanese government should support a network of pro-democracy journalists to deliver pro-democracy and pro-free trade narratives that appeal to the feelings of international audiences, no matter what the US administration does.

The momentum towards authoritarianism is real. It is time to move to fight it.

Source: East Asia Forum

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Alice Winters

Gold held a decline as progress in talks between the US and key trading partners hurt demand for haven assets.

Bullion traded near $3,390 an ounce — following a 1.3% loss in the previous session — after Bloomberg News reported the European Union could be ready to accept a 15% tariff on most of its goods going to the US. That followed a similar agreement with Japan that included a $550 billion investment pledge by the Asian country.

That drove Treasury yields higher for the first time in six days. Higher yields tend to pose a headwind for gold, which doesn’t pay interest.

The positive sentiment was tempered by US President Donald Trump’s continued threats to impose between 15% and 50% duties on other countries, like South Korea and India, that are still trying to clinch agreements before the duties come into effect on Aug. 1. Traders were also seeking clarity on the progress of negotiations with China.

Elsewhere, money markets are betting the Federal Reserve will keep interest rates on hold next week when officials gather for their July meeting. However, traders expect at least one quarter-point reduction by October, with a roughly 60% chance of a cut at the September meeting. Lower borrowing costs tend to benefit non-yielding gold.

Gold has climbed about 30% this year, as uncertainty around Trump’s aggressive attempts to reshape global trade and conflicts in Ukraine and the Middle East sparked a flight to havens. The precious metal has been trading within a tight range over the past few months after hitting an all-time high above $3,500 an ounce in April.

Spot gold was up 0.1% to $3,389.77 an ounce at 8:24 a.m. in Singapore. The Bloomberg Dollar Spot Index was steady, though the gauge is down more than 1% so far this week. Platinum rose while palladium fell.

Silver, meanwhile, steadied after reaching the highest since 2011 on Wednesday before retreating slightly. Unlike its yellow cousin, silver is in high demand as an industrial metal used in clean-energy technologies like solar panels. The cost of borrowing it has jumped above historical norms, while growing exchange-trade fund holdings have further eroded the amount of metal freely available to buy.

Source: Bloomberg Europe

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Benjamin Carter

Japan's manufacturing activity slipped into contraction in July, weighed down by uncertainties over U.S. tariffs, a private-sector survey showed on Thursday.

At the same time, Japan's service sector continued to outshine the struggling manufacturing industry, with activity growing at the fastest pace in five months, helped by robust demand.

"Business activity across Japan's private sector continued to expand at the start of the third quarter, fuelled by stronger growth of the service sector," said Annabel Fiddes, Economics Associate Director at S&P Global Market Intelligence, which compiles the PMI.

The S&P Global Japan manufacturing purchasing managers' index (PMI) dropped to 48.8 in July from June's final reading of 50.1, which was the first time the index exceeded the 50.0 threshold separating expansion from contraction in 13 months.

The key sub-indexes of output and new orders dropped at the fastest pace in four and three months, respectively, as businesses assessed the impact from U.S. tariffs, the survey showed.

"Uncertainty over future trade policy weighed on expectations regarding the year-ahead," Fiddes said.

U.S. President Donald Trump on Tuesday announced a trade deal with Tokyo that he said would result in Japan investing $550 billion into the U.S. and a 15% tariff on imports from the Asian country.

Meanwhile, the S&P Global Japan services PMI increased to 53.5 in July from 51.7 in June, thanks to new business growth.

However, new export business saw its first contraction in seven months and employment growth rose at the slowest rate in nearly two years.

Combining both manufacturing and service activity, the S&P Global Japan composite PMI in July remained unchanged from June's 51.5, the data showed.

Source: Reuters

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Olivia Brooks

Economic

Political

China–U.S. Trade War

The Trump administration and the European Union are racing to clinch a trade deal by the White House's self-imposed Aug. 1 deadline, with economists warning that a sharp hike in tariffs could raise costs for consumers and businesses.

As the clock ticks down, a series of pacts with other U.S. trading partners in recent days have raised hopes of avoiding a potentially damaging trade war with Europe, with experts saying a deal with Japan announced on Tuesday could serve as a template for a deal with the EU.

The U.S. has also recently announced the outlines of trade deals with China, Indonesia, the Philippines and U.K., though with many details still remaining to be finalized.

For consumers and businesses on both sides of the Atlantic, much is riding on the outcome of the trade talks. Absent a deal, President Trump has threatened to hit imports from the EU's 27 member countries with a 30% tax. In preparing possible countermeasures, the European Commission has said it would impose tariffs on more than $100 billion worth of U.S. goods starting Aug. 7, AFP reported on Wednesday.

Negotiations are ongoing and a U.S.-EU trade war could yet be avoided. Citing EU diplomats, AFP also said officials with the trading block could be open to a 15% U.S. tariff rate, with potential carveouts for key sectors, according to the wire service.

The White House did not immediately respond to questions about the status of talks with the EU, including whether the Trump administration expects to reach a trade deal by the Aug. 1 deadline.

President Trump on Tuesday struck a trade deal with Tokyo that calls for a 15% tariff on Japanese imports. In return, the deal calls for Japan to invest $550 billion in the U.S. and further open its domestic market to U.S. exports, including cars and certain farm products.

The 15% tariff rate on Japanese goods is five percentage points higher than a baseline tariff the Trump administration imposed on all foreign imports on April 2. But it is lower than the 25% he threatened against Japan earlier this month and the 24% duties his administration proposed in early April.

"The Japan deal solidifies this pattern we've seen thus far, which is some market access relief, a commitment to purchase U.S. goods, and a slightly lower, but above the universal baseline, tariff level," Alex Jacquez, chief of policy and advocacy at Groundwork Collaborative, a public policy research firm, told CBS MoneyWatch.

"The Japan deal certainly provides a framework of what [Mr. Trump] looking for," Jacquez said. "It's about accepting a baseline tariff at or above 10%, and then making purchase commitments."

Source: Yahoo Finance

To stay updated on all economic events of today, please check out our Economic calendar

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Manuel

Cryptocurrency

Stocks

Block joined the S&P 500 on July 23, replacing Hess after the oil producer’s $54 billion acquisition by Chevron, a reshuffle that sent Block’s stock up 10.7% from the July 18 open of $72.01 to $79.69 by press time.

The company announced the addition on July 18, prompting investors to position ahead of index-tracking funds that must purchase shares to mirror the benchmark.

Block called the move “a milestone that reflects the strength of our business and the work of thousands of people building tools to increase access to the economy,” citing products across Square, Cash App, Afterpay, TIDAL, Proto, and Bitkey.

Despite the price increase, Block’s shares are still 13% in the year-to-date timeframe.

Another Bitcoin holder in the index

Block now becomes the third publicly listed entity to join the S&P 500 that holds Bitcoin (BTC) in its treasury, alongside Tesla and Coinbase.

According to Bitcoin Treasuries data, Tesla is the tenth-largest BTC holder among publicly listed companies, with a stash of 11,509 BTC worth nearly $1.4 billion as of press time. The company has the ninth-largest weight of the index.

Coinbase holds the spot as the 12th-largest treasury, with 9,267 BTC valued at approximately $1.1 billion. It has a 0.18% weighting in the S&P 500, alongside companies such as Intel and DoorDash.

Block joins with a 0.09% weight and 8,584 BTC in reported holdings, making the company founded by Jack Dorsey the owner of $1 billion worth of Bitcoin.

Changes in perceived risk

The rally in Block’s shares highlights how index mechanics can intersect with sentiment around fintech names, which have lagged behind the broader tech-led market this year.

S&P 500 membership can lower perceived risk, broaden the shareholder base, and attract mandate-limited institutional investors.

Still, execution on core businesses will determine whether the company sustains the rerating. Square’s merchant services, Cash App’s consumer finance suite, and the Buy Now, Pay Later arm, Afterpay, remain key revenue drivers.

At the same time, newer initiatives such as self-custody wallet Bitkey and music platform TIDAL contribute to diversification.

Source: Cryptoslate

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Olivia Brooks

Economic

Political

China–U.S. Trade War

US President Donald Trump suggested that he would not go below 15% as he sets so-called reciprocal tariff rates ahead of an Aug. 1 deadline, an indication that the floor for the increased levies was rising.

“We’ll have a straight, simple tariff of anywhere between 15% and 50%,” Trump said Wednesday at an AI summit in Washington. “A couple of — we have 50 because we haven’t been getting along with those countries too well.”

Trump’s comment declaring that the tariffs would begin at 15% represented the latest twist in his effort to impose duties on nearly every US trading partner, and the latest indication that Trump was looking to more aggressively impose the levies on exports from countries outside the small group that so far has been able to broker trade frameworks with Washington.

Trump earlier this month said that more than 150 countries would receive a letter including a tariff rate of “probably 10 or 15%, we haven’t decided yet.” Commerce Secretary Howard Lutnick told CBS News on Sunday that small countries including “the Latin American countries, the Caribbean countries, many countries in Africa” would have a baseline tariff of 10%. And at the first announcement of the tariffs in April, Trump unveiled a universal tariff of 10% on nearly every country.

While Trump and his advisers initially expressed hopes of securing multiple deals, the president has been touting the tariff letters themselves as “deals” and suggesting that he is uninterested in back-and-forth negotiations. Still, he has left the door open for countries to make agreements that could lower those rates.

On Tuesday, Trump announced he was reducing a threatened 25% tariff on Japan to 15% in exchange for the country removing restrictions on some US products as well as offering to back a $550 billion investment fund. Other nations, including South Korea, India, and members of the European Union, are still pushing for an agreement before the heightened tariffs go into effect.

On Wednesday, Trump said he would “have a very, very simple tariff for some of the countries” because there were so many nations that “you can’t negotiate deals with everyone.” He said talks with the European Union were “serious.”

Source: Yahoo Finance

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Manuel

Central Bank

Economic

The European Central Bank was set to keep interest rates on hold on Thursday, pausing after seven straight cuts as it waited for the fog surrounding Europe's trade relations with the United States to clear.

The ECB has halved its policy rate from 4% to 2% in the space of just one year after taming a surge in prices that followed the end of the COVID-19 pandemic and Russia's invasion of Ukraine.

With inflation now back at its 2% goal and expected to stay there, euro zone central bankers were likely to stay put this week and observe what kind of tariffs President Donald Trump's U.S. administration would impose on the European Union after an August 1 deadline for talks.

"The ECB is widely expected to keep policy on hold this week, as uncertainty prevails with no trade deal yet on the horizon between the U.S. and EU," Christophe Boucher, chief investment officer at ABN AMRO Investment Solutions, said.

The tense and unpredictable trade talks between Washington and Brussels have made policy-making difficult.

Trump's threat to impose a 30% duty on EU goods exported to the United States - a steeper tariff than the ECB had anticipated under even the most negative of three scenarios it released last month - has forced President Christine Lagarde and her colleagues on the ECB's Governing Council to contemplate lower outcomes for growth and inflation.

However, two diplomats said on Wednesday the EU and the U.S. were heading towards a deal that would result in a broad tariff of 15% applying to EU goods.

"Even in the case of a benign outcome (i.e. U.S. tariffs around 10%) we still see scope for further easing as the disinflation process broadens," MUFG's Europe economist Henry Cook said.

Investors generally expect one more ECB rate cut by the end of the year, most likely in December.

Among the deals that have been struck so far and could serve as a template for the EU, Japan negotiated a 15% tariff rate, Indonesia 20% and Britain, which runs a trade deficit with the United States, 10%.

"The key point is that tariffs look likely to be higher and more varied across countries than the 10% flat baseline that many had assumed would be the end-point of tariff negotiations," BNP Paribas's head of developed markets economics Paul Hollingsworth said.

The ECB assumes that U.S. tariffs will push down growth and, if there is no EU retaliation, inflation over the medium term.

The euro zone economy is already barely growing and companies, while still optimistic about an upturn ahead, are starting to feel the pinch from tariffs on their profits.

"The risks are still weighted towards weaker growth outcomes for Europe," economists at Deutsche Bank wrote. "This in turn points to disinflationary risk, particularly if a trade shock were to become a labour market shock."

On the other hand, banks have seen rising loan demand and policy uncertainty has not yet translated into an economic or market downturn.

After a short-lived selloff in April investors have taken the trade turmoil in their stride, with European equity indices close to new highs also thanks to Germany's newly found appetite for spending.

In fact, erratic policy-making in the United States, including Trump's relentless criticism of the Federal Reserve, has lured foreign investors to euro zone assets, briefly pushing the euro to the highest level against the dollar since September 2021 at $1.1829 earlier this month.

ECB board member and outspoken hawk Isabel Schnabel even said the central bank should watch out for price hikes caused by tariffs and the bar for further cuts was "very high".

But the euro's appreciation has unnerved other policymakers, who fear a stronger currency would make European exports less competitive and contribute to pushing down inflation.

"On that front, we would expect Christine Lagarde to strike a reassuring tone, reminding people that the ECB does not target exchange rates but that any resulting downward pressure on inflation will be addressed, if necessary," Julien Lafargue, chief market strategist at Barclays Private Bank, said.