As the U.S. midterm elections approach, Japan worries about Washington increasing military spending and putting pressure on monetary policy

(Central News Agency Tokyo Comprehensive Foreign News Report on the 19th) "Nikkei Asia" reported that as the U.S. midterm elections in November approach, Japan is increasingly worried that Washington will increase pressure on Tokyo and require Japan to make more concessions on issues such as military expenditure sharing and monetary policy.

U.S. President Trump said he had directed War Secretary Pete Hegseth to scale back joint military exercises between the U.S. and South Korea on the grounds that they "send a completely inappropriate and hostile message" to North Korea. Trump also complained that the United States bears most of the related costs.

A former Japanese cabinet minister from Japan's ruling Liberal Democratic Party said: "Things are happening again." This person believes that as the US Republican Party strives to maintain control of both houses of Congress, Trump hopes to achieve some quick diplomatic results before the midterm elections.

The United States has an obligation to defend allies such as Japan and South Korea, but Trump believes that these countries do not share the relevant financial burden fairly, so he often asks allies to increase spending.

The United States and Japan aim to complete negotiations within this year and formulate a new five-year agreement, which will be implemented from the 2027 fiscal year, covering how to share the funds for the U.S. military stationed in Japan. This arrangement will determine how much Japan has to bear for the labor costs, water and electricity bills and other operating expenses of the US military bases.

Japan’s related expenditures in fiscal year 2026 have exceeded 200 billion yen (approximately US$1.25 billion).

"We should be prepared for the possibility of requests to increase the share," a senior defense ministry official said.

Trump made similar demands during his first term. Former U.S. national security adviser John Bolton later wrote in his memoirs that the Trump administration at the time asked Japan to increase its contribution to more than four times the original amount.

As a result, U.S.-Japanese negotiations were delayed and ultimately left to the administration of the next president, Joe Biden. The Biden administration's emphasis on relationships with allies has spared Japan the consequences of a major increase in spending.

Elbridge Colby, undersecretary for policy at the U.S. Department of War, pointed out in a speech earlier this month that "Japanese Prime Minister Sanae Takaichi has a historic majority in Congress... Japan has also talked very openly about facing an unprecedented situation." He urged Tokyo to be more active in increasing defense spending.

Washington requires allies to increase defense spending to 3.5% of gross domestic product (GDP). As Japan plans to revise three important national security documents before the end of this year, the outside world is paying attention to the extent to which Japan will increase its current defense spending target equivalent to 2% of GDP.

The diplomatic leverage the United States can use is not limited to security issues.

The Japanese and U.S. governments conducted coordinated intervention actions to buy yen at the end of July. The U.S. actions, led by U.S. Treasury Secretary Scott Bessent, appear to be curbing yen depreciation and inflation while encouraging Japan's central bank, the Bank of Japan (BOJ), to further raise interest rates.

The Bank of Japan will hold a monetary policy meeting on September 17th and 18th. Later in the same month, world leaders will gather in New York for the United Nations General Assembly, and leaders from the United States and Japan often use this occasion to hold sideline summits. If the Bank of Japan chooses to hold off on raising interest rates, Washington may increase pressure.

Japan has been very slow in fulfilling its commitment to invest $550 billion in the United States by 2025, with only about 20% currently allocated to specific projects. The Trump administration believes that these investment projects, which are directly related to job creation, are political achievements that can be easily promoted to voters.

In 2018, on the eve of the midterm elections for Trump’s first term, he strengthened his security and economic requirements for allies. He said in a speech at the time that the United States was protecting wealthy countries for free and repeatedly asked allies to pay more for U.S. defense commitments.