The United States and Japan are nearing finalization of the first three projects for a $550 billion investment fund, a central component of the bilateral trade agreement reached by the two nations last year.

According to sources familiar with the matter, the initial three projects selected are a data center infrastructure initiative led by SoftBank Group, a deepwater crude oil terminal project in the Gulf of Mexico, and a project concerning synthetic diamonds for semiconductor manufacturing. US Commerce Secretary Lutnick and Japan's Minister of Economy, Trade and Industry Akira Akazawa are scheduled to meet in Washington on Thursday, where a final agreement on these projects is expected to be determined. However, Japan's Ministry of Trade indicated that a decision within the week is not guaranteed.

The $550 billion investment fund is designed to stimulate large-scale Japanese investment in key US industries and serves as a core pillar of the tariff agreement concluded between the two countries last year. According to the agreement's terms, Japan has 45 working days to initiate funding after a project is selected. Failure to do so could result in the US reclaiming certain benefits or reimposing higher tariffs.

This mechanism underscores a direct link between investment commitments and tariff adjustments. Former US President Trump has already expressed dissatisfaction with the implementation pace of a similar agreement with South Korea, threatening to raise tariffs on South Korean imports again, adding urgency for Japan to fulfill its commitments.

The three selected projects are focused on the energy and semiconductor sectors. Following a screening process, the final shortlist includes initiatives in digital infrastructure, energy, and critical materials for semiconductors. The data center infrastructure project led by SoftBank Group is one of them.

The other two projects are the deepwater crude oil terminal in the Gulf of Mexico and the synthetic diamond project for semiconductor manufacturing. These align with the investment framework established during a previous visit by the former US president to Japan, which covered sectors such as energy, artificial intelligence, and critical minerals, and involved companies like SoftBank, Westinghouse Electric, and Toshiba.

Potential project cost estimates identified at that time ranged from $350 million to $100 billion.

The agreement includes strict compliance mechanisms. Once a project is confirmed, Japan must begin funding within 45 working days. If Japan opts not to fund a specific project, the US retains the right to revoke certain benefits or revert to higher tariff levels.

This means tariffs could potentially be raised from the current 15% to the previously threatened 25% level. Last year's tariff agreement saw the former US president agree to set tariffs on all Japanese imports at 15%, reducing previously proposed higher tariffs on automobiles, a key driver of the Japanese economy.

The $550 billion fund is intended to catalyze a wave of significant Japanese investment into critical US industries, aiding in the revitalization of American manufacturing.

The former US president has voiced displeasure regarding the progress of a comparable agreement with South Korea and has threatened to increase tariffs on South Korean goods again.