Will Japan Benefit From Massive U.S. Investments?

The agreement represents the second phase of a broader plan in which Japan is expected to invest up to 80 trillion yen in the United States, with the latest tranche totaling as much as 11.5 trillion yen. The investments will focus on building small modular nuclear reactors, constructing new gas-fired power plants, cooperating on the development of rare earth and other mineral resources, and expanding the production of US-based energy.

While the initiative may help Japan diversify its energy sources away from heavy reliance on the Middle East, concerns have emerged over whether such large-scale overseas investments will generate sufficient returns domestically.

Following the summit, a dinner event attended by prominent figures including SoftBank Group Chairman Masayoshi Son and Google CEO Sundar Pichai reflected a celebratory atmosphere, with Prime Minister Takaichi declaring, “Japan is back! Japan will once again lead global innovation.” Music from X JAPAN, a band long favored by Takaichi, played during the event, underscoring the cordial tone of the gathering.

The warm reception from the US side is widely seen as tied to Japan’s commitment to major financial contributions. A key highlight of the investment package is the construction of small modular reactors (SMRs), which are significantly more compact than conventional nuclear power plants and require only about one-twentieth of the land area.

The push for nuclear expansion in the United States has accelerated amid growing demand for electricity driven by AI data centers. Japan’s role in financing these projects places it at the center of a rapidly evolving energy strategy. The construction initiative will be led by a joint venture between Hitachi and a US company.

Yajima Koji of the NLI Research Institute described the project as a rare opportunity for Japanese firms, noting that such large-scale investments are uncommon domestically and could provide strong earnings potential for participating companies.

However, Yajima cautioned that the benefits may not flow back to Japan. He suggested that companies are increasingly likely to retain profits earned in US dollars and reinvest them within the US, reducing the likelihood of those funds being repatriated. As a result, he warned that the degree of economic return to Japan could decline.

The investment aligns with the Trump administration’s “America First” policy, effectively positioning Japan as a financial partner supporting US growth. How much this strategy contributes to Japan’s own national interest remains an open question.

The structure of the joint projects highlights a clear division of roles, with Japan providing capital while the United States supplies land, infrastructure, energy resources, and regulatory support.

Nakabayashi Mieko, a professor at Waseda University, pointed out that a broad agreement to invest approximately 550 billion dollars, or around 87 trillion yen, had already been reached in 2025, with the latest announcement representing its second phase. She emphasized that detailed discussions on the projects have not been conducted publicly.

Nakabayashi also raised concerns about profitability and accountability, warning that similar public-private investment schemes in the past have sometimes resulted in inefficient allocation of funds. If public money is involved, she stressed, there must be clear explanations regarding returns and efficiency.

At present, key details such as expected profitability and long-term economic impact remain unclear, leaving unresolved questions over whether the massive investment will ultimately benefit Japan.

Source: TBS

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