Key Points:
- Jefferies highlights a massive $550 billion U.S.-Japan investment agreement.
- The deal cuts reciprocal tariffs from 25% to 15%.
- The U.S. will retain 90% of project profits after costs.
- Japan plans to boost defense spending to $58 billion.
The partnership between the United States and Japan is becoming more critical for trade and security, yet major investors are not paying enough attention. According to a new note from Jefferies analyst Aniket Shah, a massive $550 billion investment deal is about to change the economic landscape between the two nations.
This agreement is a game-changer for American exporters. It lowers tariffs between the countries from 25% down to 15%. This reduction opens the door for more U.S. sales in manufacturing, energy, cars, and agriculture. The deal prioritizes building infrastructure for artificial intelligence and processing critical minerals. The first projects from this initiative are expected to launch as early as March.
The financial terms are heavily favorable for the United States. Jefferies notes that once the initial costs are recovered, the U.S. is positioned to keep 90% of the profits from these projects. The clock is ticking on this funding, as all money must be allocated by January 19, 2029.
Japan is already the biggest foreign player in the American financial system. By late 2025, Japan held $1.2 trillion in U.S. Treasury bonds, far more than the United Kingdom. Japanese investors also hold $819 billion in direct investments in U.S. companies, mostly in electronics, manufacturing, and finance.
Beyond money, the alliance is strengthening military ties. Japan hosts about 55,000 U.S. troops and is actively buying American defense systems, including Tomahawk missiles. To support this, Japan plans to raise its defense budget to $58 billion for the 2026 fiscal year.
Jefferies identified six specific sectors that will likely see the biggest gains from this pact. They advise investors to look closely at power and utilities, AI infrastructure, mining, defense, logistics, and biotech. These industries stand to benefit the most as the two nations integrate their economies and security strategies.
