[2025 Audit] Koo Yoon-chul on US-Japan Tariff Backdoor Deal: "Requested Confirmation, No Response"

National Assembly Planning and Finance Committee Audit
"Difficult to Pay $350 Billion in Cash... Swift Conclusion Needed in Tariff Negotiations"

Deputy Prime Minister and Minister of Economy and Finance Koo Yoon-chul stated on the 13th that, regarding the possibility of a behind-the-scenes agreement in the US-Japan tariff negotiations, he had requested confirmation from the Japanese side but had not received a response. He made it clear that it would be difficult to meet the US demand for a full $350 billion cash payment, as the funds that the foreign exchange authorities can raise without reducing foreign exchange reserves amount to only about $20 billion per year.

At the National Assembly's Planning and Finance Committee audit held that day, Deputy Prime Minister Koo said regarding the behind-the-scenes agreement in the US-Japan tariff negotiations, "The relevant ministries are inquiring with their Japanese counterparts, but officially, Japan is not responding to us." When asked again whether this issue had been discussed during the shuttle diplomacy between President Lee Jaemyung and Prime Minister Shigeru Ishiba, he replied, "It was not discussed."

Deputy Prime Minister and Minister of Economy and Finance Koo Yoon-chul is responding to a lawmaker's question at the National Assembly's Planning and Finance Committee audit held on the 13th. 2025.10.13 Photo by Kim Hyun-min

Akazawa Ryusei, Japan's Minister for Economic Revitalization who led the tariff negotiations with the United States, recently said in an interview with foreign media, "The actual cash that Japan has agreed to invest in the United States is only 1-2% of the $550 billion," adding, "The rest will be in the form of loans or loan guarantees."

The United States has increased pressure on Korea by demanding a $350 billion upfront investment, the effective deprivation of decision-making and profit-sharing rights, and the remittance of investment funds within 45 days after investment decisions, based on the memorandum of understanding (MOU) signed with Japan. These revelations have sparked suspicions that the US and Japan may have attempted to make Korea the scapegoat in the tariff negotiations through a behind-the-scenes agreement.

He added, "Regardless of what Japan did, we are discussing with the United States based on the national interest, Korea's domestic circumstances, and practical considerations, comprehensively assessing the impact on the foreign exchange market."

Deputy Prime Minister Koo made it clear that, during the tariff negotiations with the United States on July 30, ahead of the deadline for mutual tariff imposition, the approach combined equity investment, guarantees, and loans. He said, "The turning point came when Japan and the United States were negotiating, and Japan presented externally that the entire $550 billion US investment fund would be paid in cash, leading the United States to change its stance."

Yonhap News Agency

In response to a question from Democratic Party lawmaker Oh Gihyung about the maximum amount that could be invested without foreign exchange risk, he replied, "Up to $15-20 billion," adding, "To invest more than this, foreign exchange must be raised." Deputy Prime Minister Koo's remark that "foreign exchange must be raised" is interpreted as meaning borrowing dollars from the United States through the establishment of a currency swap line.

The United States and Korea have reached an impasse in negotiations over how to raise the $350 billion US investment agreed at the end of July. President Donald Trump insists on a cash payment, calling it an "upfront" payment, while the Korean government has made an unlimited currency swap a precondition.

Deputy Prime Minister Koo reaffirmed the existing position, stating, "Even if foreign exchange is raised, it will not be used unconditionally, but only for projects that are commercially viable and where the investment can be recovered." He emphasized, "Our consistent position is that the approach must combine loans, guarantees, and equity investment."

According to the Bank of Korea Act, foreign exchange reserves are foreign currency assets managed by the Bank of Korea for financial stability purposes. They must be very safe and readily available like cash in emergencies, so they cannot be used for equity investment purposes. As of the end of last month, Korea's foreign exchange reserves stood at approximately $422 billion.

When asked by an opposition lawmaker whether it would be possible to pay the $350 billion US investment in cash, Deputy Prime Minister Koo replied, "It would be difficult," adding, "I sufficiently persuaded Secretary Besant about our foreign exchange situation last time." He continued, "Secretary Besant responded that he understood the situation in our foreign exchange market and would discuss it internally."