Reasons why the US-Japan cooperation agreement is underestimated among institutional investors

LootboxPhobia · 2026-02-14T10:23:47+00:00

The US-Japan partnership is increasingly important in trade, investment, and security, but has not yet gained significant attention from investors. The $550 billion investment agreement will reduce taxes and boost US exports, with a focus on energy and artificial intelligence. At the same time, Japan's position in the US capital markets is significant, holding large amounts of government bonds and stocks. US-Japan defense cooperation is strengthening, and Japan plans to increase defense spending. Jefferies analyzes six major benefiting sectors, highlighting investment opportunities.

LootboxPhobia

2026-02-14 10:23:47

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Investing.com - The importance of the US-Japan partnership in trade, investment, and security is increasing, but Jefferies states that this relationship still has not received full attention from institutional investors.

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Analyst Aniket Shah noted in a client report this week that the $550 billion investment agreement is a key catalyst, reducing tariffs from 25% to 15% and expanding US export access in the fields of manufacturing, aerospace, agriculture, energy, automotive, and industrial products.

The agreement prioritizes energy, artificial intelligence infrastructure, and critical mineral processing, with the first projects expected to launch before March.

Jefferies stated, “Once costs are recovered, the US is expected to retain 90% of project-level profits, and all funds must be allocated by January 19, 2029.”

As Japan procures more US systems, including deploying Tomahawk missiles, cooperation in defense will also increase.

Japan has played a central role in the US capital markets. By the end of 2024, Japan’s stock of foreign direct investment in the US reached $819 billion, the largest among all countries, mainly concentrated in manufacturing, electronics, and financial services.

By November 2025, Japan’s holdings of US Treasuries will increase to $1.2 trillion, surpassing the UK by $314 billion, and Japan remains a major holder of US stocks, institutional bonds, and corporate bonds.

The US-Japan alliance is strengthened through security ties, with approximately 55,000 US troops stationed in Japan, participating in the Quadrilateral Security Dialogue and trilateral cooperation with South Korea and Japan. Japan plans to increase its defense spending to $58 billion in fiscal year 2026, a 3.8% increase.

Jefferies identified six sectors that could benefit from this agreement: power and utilities, artificial intelligence infrastructure, mining and metals, defense and aerospace, manufacturing and logistics, and pharmaceuticals and biotechnology, highlighting broad economic and strategic opportunities for investors.

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