TMTPOST -- The outlook of Japan-U.S. trade deal seems turning gloomy, reports on Friday suggested.

Credit：Xinhua News Agency

The Japanese government scrapped a high-level meeting with the U.S. after the Trump administration abruptly asked its Asian ally to raise the defence budget to 3.5% of gross domestic product, or GDP, higher than its previous request of 3%, the Financial Times (FT) quoted people with knowledge of the matter on Friday. The meeting was cancelled as such latest U.S. request reportedly annoyed Tokyo.

The abovementioned meeting refers to the so-called “2+2” annual security talks due on July 1. U.S. Secretary of State Macro Rubio and Defence Secretary Pete Hegseth are supposed to meet Japan’s Foreign Minister Takeshi Iwaya and Defence Minister Gen Nakatani in Washington.

The decision to scrap the meeting was also related to the July 20 Upper House elections where ruling Liberal Democratic Party is expected to suffer a loss of seats, the FT learned from a senior Japanese official.

Earlier Friday, Japan’s top trade negotiator Ryosei Akazawa made remarks, arousing speculations that Tokyo became more cautious on making a deal to ease trade disputes with the U.S.

Akazawa said that negotiations remained "in a fog" despite both sides seeking to make a deal. The Japanese Economic Revitalization Minister also said the government is not fixated on the July 9 deadline, , which is when the Trump administration’s reciprocal tariffs return to higher levels from the baseline level 10%.

“To avoid any misunderstanding, I would like to confirm that I have not said at all that July 9 is the deadline for negotiations between Japan and the US,” Economic Revitalization Minister Ryosei Akazawa told reporters in Tokyo. “Japan and the US are in regular communication through various channels, and we will continue to consider what is most effective and engage in appropriate consultations.”

Asked what Japan would do if the reciprocal tariff returns to 24% or the U.S. puts out a different level unilaterally beyond the deadline, Akazawa hinted at optimism for an extension. “We are proceeding with the negotiations in good faith and so we understand that various matters will proceed under that premise,” he said. A Liberal Democratic Party’s tariff task force didn’t urge him to seek an extension of the deadline next month, Akazawa also said after he attended a meeting of the task force.

Japanese Prime Minister Shigeru Ishiba spoke to U.S. President Donald Trump in a phone call last week ahead the Group of Seven (G7) gathering in Canada starting Sunday. During the call, Ishiba reiterated Japan’s vies on the U.S. tariffs measures, taking into account the results of the Japan-U.S. Consultations on the U.S. Tariff Measures to date, according to a statement from Japan’s Ministry of Foreign Affairs. The two leaders concurred to accelerate the consultations between the ministers in charge in order to achieve a mutually beneficial agreement for both Japan and the U.S., per the statement.

Ishiba told reporters following the call on June 13 that he and Trump will hold a bilateral meeting next week on the sidelines of the G7 leasers summit, and “we have confirmed that a meeting will be held there to further deepen discussions on Japan-U.S. cooperation.”

However, Trump’s early exit meant the expected meeting between leaders of the U.S. and Japan meant this discussion never took place.

Akazawa on June 13 refrained from commenting on if Ishiba and Trump may announce a deal on the sidelines of the G7 summit. That day saw he met with U.S. Treasury Secretary Scott Bessent and Commerce Secretary Howard Lutnick separately in Washington in a sixth round of tariff negotiations. Akazawa said officials from both countries “had a very detailed exchange and explored the possibility of a trade agreement.” He also said Japan is trying to avoid the auto tariffs going even higher via its bilateral talks with the U.S., without offering details of specifics of the latest negotiations.