TOKYO: The Japanese government has announced a sweeping ¥2.2 trillion (US$15.5 billion) economic support package to protect small and medium-sized enterprises (SMEs) from the adverse effects of US-imposed tariffs, including steep levies on cars, steel, and aluminium.
The measures, revealed today by Chief Cabinet Secretary Yoshimasa Hayashi, aim to safeguard the backbone of Japan’s economy through corporate financing support and eased loan conditions via a government-backed lending institution.
“We will provide full support for small and medium-sized enterprises affected by the US tariffs,” Hayashi said during a press conference.
The aid comes amid heightened trade tensions with Washington, following a series of tariff hikes introduced by US President Donald Trump. Japan, a key American ally, currently faces a baseline 10% tariff on most exports to the US, as well as harsher duties of up to 25% on automotive products — a vital sector which accounts for approximately 8% of all Japanese employment.
In early April, Trump announced a new 24% “reciprocal” tariff specifically targeting Japanese goods, but temporarily paused enforcement until early July. Negotiations are ongoing, with Japan’s tariffs envoy expected to return to Washington this week for a fourth round of bilateral talks.
Prime Minister Shigeru Ishiba is aiming to secure a breakthrough agreement during his upcoming meeting with President Trump at the Group of Seven (G7) summit in Canada next month.
Economic Headwinds and Political Stakes
The relief plan arrives at a precarious time for the world’s fourth-largest economy, which contracted by 0.2% in the first quarter of 2025. The downturn, driven by export pressures and rising costs, has amplified scrutiny of Ishiba’s leadership ahead of Japan’s upper house elections scheduled for July.
In a bid to shield households from surging living expenses, the government will also allocate an additional ¥288 billion to subsidise electricity and gas bills from July to September — the peak period for air conditioning usage due to Japan’s sweltering summer temperatures.
According to Hayashi, this initiative is expected to reduce utility costs by approximately ¥3,000 per family over the three-month period.
Targeted Grants and Energy Cost Mitigation
Beyond household relief, the package includes plans to expand special grants for institutions such as hospitals and small businesses, allowing them to manage energy costs not covered by existing assistance programmes.
This move complements broader efforts to offset the ripple effects of inflation and maintain economic stability in the face of mounting external pressures.
With tariff talks continuing and domestic sentiment wavering, Japan’s comprehensive relief measures reflect a strategic attempt to cushion its economy while maintaining diplomatic channels with Washington.
As both nations prepare for high-level discussions in Canada, all eyes are on whether Tokyo can negotiate a rollback of the tariffs — a potential lifeline for the thousands of SMEs now struggling to absorb higher operational costs.
