Japan the first key litmus test on Trump's willingness to strike a compromise

Japan economy minister, Ryosei Akazawa, will be meeting with Trump himself alongside Bessent and Lutnick later today. As a reminder, Japan was slapped with 24% tariffs initially prior to the pause last week and they are still subject to the 25% auto tariffs separate to that.

As much as Japan tried to talk a hard line coming into negotiations, they are at the end of the day still one of the US' closest allies. And at this point, they are perhaps the closest one already given the breakdown in relations elsewhere. Ishiba has said they won't be making "big concessions" but we all know that they're not willing to go tit-for-tat against the US no matter what.

This makes this one of Trump's easier battles to win in the tariffs war - if not the easiest.

Despite that, this will still act as a key litmus test on Trump's willingness to compromise. The thing is the majority will expect some kind of positive news to come from the negotiations. But if it goes south, it will reflect poorly on the overall situation. If even Japan can't reach a deal, what more the EU and China.

This is a market that is desperate for good news and it might get some from Japan's visit this week. But best be warned, it will be tough not to look past the bias of Japan's relationship with the US in all of this. Even with a positive outcome, I wouldn't take it as a strong signal of how other negotiations will pan out - especially with China, if we ever get there.