Under the terms of the US-Japan deal lowering threatened tariffs, Tokyo will invest the money in the US, according to the White House.
South Korea is also on the hook for US$350 billion of investments under a last-minute agreement struck in July reducing looming levies.
US President Donald Trump has said both countries will provide this “signing bonus” upfront.
A US-Japan memorandum of understanding (MoU) made no mention of immediate payments, saying that would be made “from time to time”.
The MoU also stipulated that Tokyo would provide the necessary funding within 45 days of Washington selecting an investment area, or face higher tariffs.
However, Ryosei Akazawa, who negotiated the deal for Japan, has said that only 1%-2% of the US$550 billion will be actual investment, with the rest loans and loan guarantees.
Washington “isn’t particularly interested in the distinction between investments, loans, and loan guarantees” he said today.
“I do not believe there are any discrepancies. In order to avoid discrepancies, the US proposed the MoU and Japan responded to that. And it was signed,” he told reporters.
“A MoU is not a treaty, nor is it legally binding. An MoU is an administrative document that lays out the common understanding, which I believe we have on both ends,” he added.
Mission impossible
Washington agreed in August to reduce across-the-board tariffs from 25% to 15% on South Korea – as it did for Japan – though the higher levies were kept on certain products such as steel.
However, the reduction has yet to take effect.
At the time, Trump said South Korea would provide US$350 billion for investments and purchase US$100 billion in liquefied natural gas or other energy products.
According to government sources in Seoul, the plan initially included direct investment, loans and guarantees, with South Korea trying to cap direct investment at around 5% and cover most of its commitments through guarantees.
Washington, however, is pushing for a larger share of direct equity investment in sectors of its choosing.
South Korea’s national security adviser Wi Sung-lac told a briefing on Monday that providing US$350 billion in cash was “impossible”.
Seoul has also requested a currency swap to help reduce foreign exchange market volatility.
Finance minister Koo Yun-cheol also met US treasury secretary Scott Bessent last week to discuss the package and foreign currency concerns.
Koo told reporters that “consultations have been completed and an announcement will be made soon”.
“Our country’s foreign exchange reserves are at the level of US$410 billion, which is insufficient to defend against the rise in the exchange rate caused by US$350 billion investment in the US,” Kim Dae-jong, professor of business at Sejong University, told AFP.
“The government must explain well to the US that even though Korea is an allied country, it is difficult to be asked for excessive direct investment and tariff burdens,” Kim said.