*

Deal includes $550 bln Japanese investment package

*

Tariffs on Japanese imports cut to 15% from 25%

*

Japanese stocks jump, led by automakers

(Adds details on stock market moves in paragraph 4)

By Trevor Hunnicutt, Jasper Ward and Mariko Katsumura

WASHINGTON/TOKYO, July 22 (Reuters) - U.S. President

Donald Trump struck a trade deal with Japan that lowers tariffs

on auto imports and spares Tokyo punishing new levies on other

goods in exchange for a $550 billion package of U.S.-bound

investment and loans.

It is the most significant of a clutch of deals Trump has

bagged since unveiling sweeping global levies in April.

Japan's critical autos sector, which accounts for more

than a quarter of its U.S. exports, will see existing tariffs

cut to 15% from 25%. Duties that were due to be imposed on other

Japanese goods from August 1 will be cut by the same amount.

The announcement sent Japan's benchmark Nikkei stock index

climbing over 3% to its highest in a year, led by stocks in

automakers with Toyota ( TM ) up more than 14% and Honda ( HMC )

nearly 12%.

"I just signed the largest TRADE DEAL in history with

Japan," Trump said on his Truth Social platform. "This is a very

exciting time for the United States of America, and especially

for the fact that we will continue to always have a great

relationship with the Country of Japan," he added.

Ishiba, who local media reported will soon resign after a

bruising election defeat on Sunday, hailed the deal as "the

lowest figure among countries that have a trade surplus with the

U.S."

The U.S. investment package includes loans and guarantees

from Japanese government-affiliated institutions of up to $550

billion to enable Japanese firms "to build resilient supply

chains in key sectors like pharmaceuticals and semiconductors,"

Ishiba said.

Japan will also increase purchases of agricultural products

such as U.S. rice, a Trump administration official said. Ishiba

said the share of U.S. rice imports may increase under its

existing framework but that the agreement did "not sacrifice"

Japanese agriculture.

The exuberance in financial markets spread to shares of

South Korean carmakers, as the Japan deal stoked optimism that

South Korea could strike a comparable deal. The yen firmed

slightly against the dollar, while European and U.S. equity

index futures rose.

But U.S. automakers signaled their unhappiness with the

deal, raising concerns about a trade regime that cuts tariffs on

auto imports from Japan while leaving tariffs on imports from

their plants and suppliers in Canada and Mexico at 25%.

"Any deal that charges a lower tariff for Japanese imports

with virtually no U.S. content than the tariff imposed on North

American-built vehicles with high U.S. content is a bad deal for

U.S. industry and U.S. auto workers," said Matt Blunt, who heads

the American Automotive Policy Council which represents General

Motors Ford and Chrysler parent Stellantis ( STLA )

.

'MISSION COMPLETE'

Autos are a huge part of U.S.-Japan trade, but almost all of

it is one-way to the U.S. from Japan, a fact that has long irked

Trump. In 2024, the U.S. imported more than $55 billion of

vehicles and automotive parts while just over $2 billion were

sold into the Japanese market from the U.S.

Two-way trade between the two countries totaled nearly $230

billion in 2024, with Japan running a trade surplus of nearly

$70 billion. Japan is the fifth-largest U.S. trading partner in

goods, U.S. Census Bureau data show.

Trump's announcement followed a meeting with Japan's top

tariff negotiator, Ryosei Akazawa, at the White House on

Tuesday.

"#Mission Complete," Akazawa wrote on X, later saying the

deal did not include Japanese exports of steel and aluminum that

are subject to a 50% tariff, nor any agreement on defence

budgets.

The deal was "a better outcome" for Japan than it

potentially could have been, given Trump's earlier unilateral

tariff threats, said Kristina Clifton, a senior economist at the

Commonwealth Bank of Australia in Sydney.

Kazutaka Maeda, an economist at Meiji Yasuda Research

Institute, said that "with the 15% tariff rate, I expect the

Japanese economy to avoid recession."

Japan is the largest investor in the United States. Together

with pension giant GPIF and Japanese insurers, the country has

about $2 trillion invested in U.S. markets.

Besides that, Bank of Japan data shows direct Japanese

investment in the United States was $1.2 trillion at the end of

2024, and Japanese direct investment flows amounted to $137

billion in North America last year.

Speaking later at the White House, Trump also expressed

fresh optimism that Japan would form a joint venture with

Washington to support a gas pipeline in Alaska long sought by

his administration.

"We concluded the one deal ... and now we're going to

conclude another one because they're forming a joint venture

with us at, in Alaska, as you know, for the LNG," Trump told

lawmakers at the White House. "They're all set to make that deal

now."

Trump aides are feverishly working to close trade deals

ahead of an August 1 deadline that Trump has repeatedly pushed

back under pressure from markets and intense lobbying by

industry. By that date, countries are set to face steep new

tariffs beyond those Trump has already imposed since taking

office in January.

Trump has announced framework agreements with Britain,

Vietnam, Indonesia and paused a tit-for-tat tariff battle with

China, though details are still to be worked out with all of

those countries.

At the White House, Trump said negotiators from the European

Union would be in Washington on Wednesday.

(Reporting by Trevor Hunnicutt, Jasper Ward and Mariko

Katsumura. Additional reporting by Makiko Yamazaki, Satoshi

Sugiyama, Andrea Shalal, David Shepardson, Vidya Ranganathan and

Kevin Buckland; Writing by James Oliphant and John Geddie;

Editing by Lincoln Feast.)