Japan’s participation in a $40bn nuclear power project in the US has stalled over liability concerns. Prime Minister Sanae Takaichi agreed in March to fund next‑generation small modular reactors in Tennessee and Alabama as part of a $550bn investment pledge tied to lower US tariffs.

Japanese lenders, including the Japan Bank for International Cooperation, fear they could be held responsible for a meltdown. US Commerce Secretary Howard Lutnick gave verbal assurances that Japan would bear no liability, but no written legal exemption exists. The US says the reactors will be 100% US‑owned on federal land, while Japanese negotiators say they cannot be legally excluded. Japanese officials also note that the usual 45‑day funding deadline for the accompanying $33bn gas‑fired plants was not triggered, and the US only recently requested capital for them. The US Commerce Department provided a written briefing on July 15 explaining the liability structure, but Japanese negotiators did not raise questions.

The deadlock echoes Japan’s trauma from the Fukushima disaster, where decommissioning and compensation cost ¥23.4tn. No commercial SMRs are yet operational, adding uncertainty. Negotiations also face pressure to deliver a third project batch before US midterms, with financing now expected to involve Citi and Morgan Stanley backed by Nexi guarantees.