The U.S. stock market bull market welcomes a super catalyst! Japan's $550 billion investment blueprint for the U.S. is unveiled, covering fields such as nuclear energy, AI, and semiconductors

According to the Zhitong Finance APP, the Japanese government has announced a potential investment project list for its $550 billion U.S. investment tool, providing a first glimpse into the core mechanism that may fund specific proposals in the U.S. as a key component of the U.S.-Japan trade agreement. For the current super bull market in U.S. stocks that began in early 2023, this significant catalyst of large-scale investment from Japan may lead the market to set aside the so-called "AI bubble theory," as the trajectory of the U.S. stock market bull run may continue under such massive investment.

It is understood that the latest briefing released by Japan's Ministry of Economy, Trade and Industry on Tuesday listed large Japanese enterprises intending to initiate projects, covering a wide range of fields from nuclear energy, semiconductors, shipbuilding to artificial intelligence, critical minerals, and quantum computing. The companies initially covered in this list from Japan's Ministry of Economy, Trade and Industry include SoftBank Group, Westinghouse Electric, and Toshiba, with potential project investments ranging from $350 million to as much as $100 billion.

Hours before this significant announcement, U.S. President Donald Trump praised the alliance between the U.S. and Japan on Tuesday, while also expressing appreciation for Japan's new Prime Minister, Fumio Kishida. The two then signed cooperation agreements and related documents concerning trade and critical minerals, aiming to formalize certain elements of the U.S.-Japan cooperation agreement previously led and mediated by former Japanese Prime Minister Shigeru Ishiba, which includes a commitment from the Japanese government to invest $550 billion in projects in the U.S.

"I really want to thank Japan because they are making a massive investment in the United States," Trump stated on Tuesday aboard the USS George Washington in Yokosuka, south of Tokyo. "They are important investors in our country, and we welcome that," he emphasized. He also added that Kishida told him that Toyota Motor Corporation would continue to build large automotive manufacturing plants across the U.S., "with a scale exceeding $10 billion," Trump mentioned in the interview.

Although Toyota did not appear in the investment briefing from Japan's Ministry of Economy, Trade and Industry, Trump repeatedly mentioned Toyota during the interview. Notably, U.S. Secretary of Commerce Gina Raimondo later met with executives from many of the large Japanese companies listed, where more information about Japanese companies planning to make large-scale investments in the U.S. may be revealed.

"You are standing at the starting point. It is you. You are the foundation of everything. This is really, very exciting," Raimondo stated in the interview. "It is not often that so much power is gathered in one room at the same time," she added.

In terms of total investment project scale, energy-related projects appear to carry significant weight in the U.S.-Japan investment list. The Westinghouse Electric project for constructing AP1000 nuclear reactors and small modular reactors (SMRs) is expected to be valued at up to $100 billion, involving many Japanese suppliers, including Mitsubishi Heavy Industries, as well as numerous power operators. Another small modular reactor project potentially involving Hitachi GE Vernova is also described as being valued at up to $100 billion Analysts have indicated that the U.S. government will ultimately decide which projects will see cuts to the investment fund, although it is expected that Japan will also have some say. However, if Japan fails to provide funding for the investment projects chosen by Trump, he retains the option to restore higher tariffs.

According to the memorandum of understanding between the two countries, this significant investment fund of up to $550 billion aims to promote economic growth and national security interests for both countries through investments in semiconductors, pharmaceuticals, metals, critical minerals, shipbuilding, energy, artificial intelligence, and quantum computing.

This "super investment fund" of up to $550 billion is considered the most critical element behind the U.S.-Japan trade agreement reached in July, under which Trump significantly reduced the U.S. import tariff on Japanese cars from 27.5% to 15%. Trump also set tariffs on many other important Japanese export goods at the same level.

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The "fact sheet" from Japan's Ministry of Economy, Trade and Industry shows that the intended projects cover energy to AI/critical minerals, with a preliminary list of companies including SoftBank, Westinghouse, and Toshiba, with individual project sizes ranging from $350 million to as high as $100 billion (such as AP1000 and SMR). This signifies substantial capital expenditure in the industrial chain, especially for the U.S. AI computing industry chain covering nuclear energy/power equipment, AI infrastructure, and semiconductor manufacturing.

The U.S. side will establish an investment committee to lead the selection process and may raise tariffs/adjust allocations if Japan does not contribute funds, thereby increasing enforcement constraints. At the same time, it promises to expedite access and permits for federal land/water/electricity, which is very beneficial for accelerating the implementation of AI infrastructure and large chip manufacturing projects.

In terms of the transmission to the U.S. macroeconomy, this will significantly boost the persistently weak manufacturing capacity and the overall non-farm employment market in the U.S. in recent years. Moreover, this rare large-scale foreign investment, along with the Trump administration's so-called "America First" policy framework, will push U.S. companies to focus more on procuring domestic goods.

From the current disclosures, Japan's massive investment of up to $550 billion will concentrate on manufacturing sectors such as nuclear energy and grid infrastructure, semiconductor manufacturing and high-end equipment, critical minerals/battery materials, and broader AI infrastructure construction, undoubtedly bringing capacity expansion and soaring stock market valuations to these manufacturing sectors in the U.S. market.

Regarding the framework and allocation mechanism for investment projects, according to multiple disclosed memorandums (MOU) and policy interpretations, each selected project will establish a new SPV, initially allocating 50/50 until reaching the "deemed allocation," and then splitting 90% (U.S.)/10% (Japan); the latest disclosures appear to be more "phased" compared to the July White House's claim of "America taking 90% of the profits."