Japan's election outcome may put the central bank in a double bind as prospects of big spending could keep inflation elevated while potentially prolonged political paralysis and a global trade war provide compelling reasons to go slow on rate hikes.

Tokyo and Washington have been negotiating a deal to avoid 25% US tariffs on Japanese exports to the world's largest economy. On July 7, Trump notified several US trading partners of increased country-specific "reciprocal tariff" rates, with Japan due to be subject to 25% tariffs as of Aug. 1 unless another deal is reached beforehand.

Japanese Prime Minister Shigeru Ishiba has vowed to remain in office, despite exit polls indicating that his Liberal Democratic Party's ruling coalition has lost its majority in the country's upper house.

Japan’s top trade negotiator Ryosei Akazawa said he’s aiming to visit Washington next week to continue efforts to win tariff concessions after talks on Saturday with US Treasury Secretary Scott Bessent didn’t touch on the issue.

Japan's top tariff negotiator, Ryosei Akazawa, said on Saturday he planned to visit Washington next week to hold further ministerial-level talks with the United States. Tokyo hopes to clinch a deal by an August 1 deadline that will avert President Donald Trump's tariff of 25% on imports from Japan.

Japan's trade surplus significantly narrowed to JPY 153.1 billion in June 2025, a substantial drop from JPY 221.3 billion a year prior and well under the forecasted JPY 353.9 billion. Exports fell for the second consecutive month,

In Japan, the ruling coalition lost control of the upper house in an election on Sunday, further weakening Prime Minister Shigeru Ishiba's grip on power as a tariff deadline looms

The decrease in exports was a reversal of the 0.5% rise expected by economists polled by Reuters, and comes amid a lack of a breakthrough in trade talks with the U.S.