In September 2025, Japan agreed to provide $550 billion for U.S. investments that President Trump will personally direct in exchange for a partial rollback of the steep tariffs he had imposed on Japanese goods. The deal, formalized in a memorandum of understanding, operates outside the congressional appropriations process. To grasp the scale of the agreement, this $550 billion slush fund would amount to eight percent of federal spending in FY2024, or more than the GDP of 34 states and all but 26 countries.
Earlier this week, the U.S. and Japan held a signing ceremony touting up to $490 billion in projects under the September deal and framing them as evidence that the program is already delivering results. But Japan’s own announcement tells a different story: the same companies have merely expressed interest in possible projects, no binding contracts have been signed, and the proposals remain under review by the administration. The episode makes clear that the September deal is moving forward, even as the administration offers little transparency about its legal basis and has secured no congressional approval.
Under the agreement, for each project, the United States will establish a new corporate vehicle to receive funds, channel them into U.S. projects, and distribute any returns. In practical terms, the President would control a $550 billion pool of foreign capital through entities his administration creates and manages. That structure circumvents the U.S. Constitution’s Appropriations Clause and the fiscal safeguards Congress designed to enforce it, replacing the ordinary budget process with a system answerable only to the White House.
Overview of the Deal
In April 2025, President Trump invoked the International Emergency Economic Powers Act (IEEPA) to declare a national emergency, citing “large and persistent” trade deficits. He then imposed a 10 percent “reciprocal tariff” on imports from major trading partners, including Japan, later raising Japan’s tariff to 25 percent. The escalation prompted negotiations that produced a framework agreement in July 2025 and a final memorandum and executive order in September 2025. Under that deal, Japan pledged to invest $550 billion in U.S. industries such as semiconductors, energy, and shipbuilding in exchange for partial tariff relief. The Federal Circuit has since ruled that the President lacked the authority to impose the tariffs under IEEPA, and the Supreme Court is scheduled to hear oral arguments on November 5.
The Japanese-U.S. Memorandum of Understanding gives President Trump near-total discretion over how those funds will be invested. Under the proposed structure, an investment committee chaired by the Commerce Secretary will recommend projects, but the final decisions rest with the President. All investments must be made before the end of his term. Once a project is selected, Japan has 45 business days to decide whether to fund it, with tariff increases or profit penalties if it declines. For each approved investment, the United States will form a special-purpose vehicle (SPV) to receive Japan’s money and manage the project, with the U.S. serving as general partner. Profits will be split evenly between the two countries until a set threshold, then 90–10 in America’s favor. The Department of Commerce will execute and oversee the program’s operations.
The deal gives the administration sweeping control over hundreds of billions of dollars in foreign capital through entities it creates and manages, without congressional authorization or oversight. Yet despite the agreement’s scale and the creation of a wholly new investment framework, the White House’s executive order only referenced the $550 billion investment without explaining how the deal will operate. And while Japan has publicly released the memorandum, the Trump administration has not—another omission.
The administration is already operationalizing the framework. In the October 28 fact sheet, the White House touted nearly $490 billion in what it described as new investments under the September memorandum and held a signing ceremony in Japan with about a dozen companies. The fact sheet groups the proposed funding into categories such as energy infrastructure, artificial-intelligence infrastructure, and critical-minerals manufacturing, naming a mix of U.S. and Japanese firms. Several projects, however, list no participating company at all. Commerce Secretary Howard Lutnick later posted a video on X explaining the September deal again, confirming that implementation is proceeding as originally agreed upon.
In contrast, Tokyo struck a far more cautious tone. Japan released its own fact sheet listing the same 15 companies (and six more) that had merely expressed interest in potential projects and made no binding commitments. It characterized the dollar figures as rough estimates, and Japan’s finance minister noted that it remains unclear how many of the projects will move forward or how much financing will ultimately be involved. The proposals will still need to undergo review by the Department of Commerce’s investment committee, which recommends projects for presidential approval, and no final decisions have been announced. Two companies issued press releases stating they had signed memoranda of understanding with the Department in support the new agreement, but no binding contracts or enforceable investment commitments have been disclosed.
How the Deal Breaks Federal Fiscal Law
The Japan deal builds a second budget outside the law. By directing foreign money through corporations it creates and controls, the administration has assumed powers that belong to Congress alone. The following sections explain how the arrangement breaches the Constitution’s Appropriations Clause and the fiscal statutes that enforce it: the Miscellaneous Receipts Act, the Anti-Deficiency Act, and the Government Corporation Control Act.
Violating the Appropriations Clause
The Constitution gives Congress alone the power of the purse, prohibiting the executive from spending or directing funds without legislative approval. The Appropriations Clause provides:
“No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law.” That safeguard ensures that Congress—not the president—decides which programs to fund and how much to allocate. Members exercise oversight through hearings, audits, and constituent engagement, ensuring that major development projects reflect both national priorities and local needs. If the Japan deal continues to proceed outside the standard processes, members of Congress will have no voice in how the executive branch funds massive investment projects that could reshape industries and employment in their own states and districts.
By longstanding practice, significant trade agreements are submitted to Congress for approval under procedures established by statute, reflecting its constitutional authority “to regulate Commerce with foreign Nations.” The Supreme Court has rejected the notion that foreign affairs place the executive beyond Congress’s reach. As the Court explained in Zivotofsky v. Kerry (2015), “the President is not free from the ordinary controls and checks of Congress merely because foreign affairs are at issue.” That principle applies with particular force here: directing and spending money are among Congress’s most fundamental checks, not exceptions to them.
The Japan deal bypasses Congress by excluding it from both consideration of a major trade agreement and control over the hundreds of billions of dollars the agreement directs. Negotiated as a “non-binding” memorandum and executed solely by the executive branch, it proceeds without any statutory or legislative approval, thereby exercising powers that belong to Congress and eroding the safeguards that protect its control of the purse.
Violating the Miscellaneous Receipts Act
The Miscellaneous Receipts Act (MRA) provides that “an official or agent of the Government receiving money for the Government from any source shall deposit the money in the Treasury.” Once deposited, those funds cannot be withdrawn without an appropriation from Congress. Enacted in the 19th century to enforce the Appropriations Clause, the MRA prevents the executive from financing itself through outside sources—foreign, private, or otherwise.
The Government Accountability Office (GAO), the Justice Department’s Office of Legal Counsel (OLC), and the courts have long recognized that agencies cannot evade the MRA simply by structuring a transaction so that no federal official ever handles the money. GAO reads the MRA broadly, emphasizing that what matters is not form but the degree of control the government exercises over the funds. OLC has taken a narrower view, focusing on whether the government retains authority over the funds once a transaction is complete. But the Japan deal violates the MRA under either interpretation.
In defense of the deal, the administration may point to OLC’s 2006 Softwood Lumber opinion, which concluded that the United States did not violate the MRA when it settled trade litigation with Canada. Under that settlement, Canada agreed to provide $450 million to a private foundation that would distribute the funds to pre-designated causes in the United States. OLC reasoned that the funds were never received “for the Government” because the United States retained no control over them once the settlement was executed. The money passed directly from Canada to the foundation, and the United States had no continuing authority to manage or redirect it.
The Japan deal is fundamentally different. Here, the President will personally decide which projects receive funding, direct the flow of Japan’s money through entities the United States forms and governs, and oversee the investments—all after the memorandum’s execution. In Softwood Lumber, the United States never controlled the funds; in this case, they remain under presidential control from start to finish.
The SPV structure does not cure the problem. These SPV entities will be “form[ed],” “managed,” and “governed” by the United States. Once Japan’s funds enter an SPV, they are received by an “agent of the Government” and must be deposited in the Treasury. Even if Japan transferred the money directly to U.S. companies rather than through an SPV, the payments would still violate the MRA because the President is deciding which companies receive them.
The same applies to the investment proceeds. Any returns flowing back through the SPVs are federal receipts that must be deposited in the Treasury. Instead, the memorandum directs that investment returns flow into the SPVs and then to the United States and Japan. The portion flowing to Japan violates the MRA outright; the American share does too if it is retained or spent outside the Treasury.
Violating the Anti-Deficiency Act
The same structure that allows the President to direct foreign funds instead of depositing them in the Treasury also violates the Anti-Deficiency Act (ADA)—one of Congress’s core fiscal safeguards. The Act makes it illegal for federal officials to spend money that Congress has not appropriated. Here, the United States will receive billions of dollars outside the Treasury and use them to make loans, loan guarantees, and investments. Because Congress has appropriated no money for this purpose, every dollar spent will exceed the amounts legally available for expenditure. The source of the funds does not matter; what matters is that they are public funds spent without congressional authorization. That is a direct violation of the Act.
The problem does not end there. Under the memorandum, the United States will also share profits from those investments with Japan. Because the memorandum creates no enforceable rights, any decision to transfer proceeds to Japan will rest entirely with the executive’s discretion. Each time the administration chooses to make such a payment, it will be spending public money that Congress has never approved or appropriated—another ADA violation.
Violating the Government Corporation Control Act
The Japan deal does not just place public money outside the Treasury; it also channels it through new corporate vehicles that Congress never approved. If the MRA is the money problem, the Government Corporation Control Act (GCCA) is the machinery problem.
Congress passed the GCCA in 1945 in response to the growth of government-created corporations performing federal functions with little oversight. The law barred any agency from “establish[ing] or acquir[ing] a corporation to act as an agency” without specific statutory authorization, and it imposed requirements for management, budgeting, and fiscal accountability on those corporations that remained. The goal was simple: restore Congress’s control over the machinery of government. As the GAO and the OLC have long recognized, if the United States needs a corporation, Congress must authorize it.
The Japan memorandum does precisely what the Act forbids: it directs the Department of Commerce to create and manage government-run corporations to invest foreign funds and distribute profits—each one, in substance, a government corporation performing federal functions without congressional authorization. Commerce has no independent statutory authority to create or manage such entities. Even the Trump administration’s own OLC recently reaffirmed, in a separate context, that the department lacks authority to create corporations without explicit congressional authorization.
While the new corporations would still be subject to some cross-cutting laws governing agency operations, they would slip past others, like the Federal Financial Management Improvement Act, which requires agencies to follow federal accounting standards. GAO’s authority to audit them may be contested as well, further weakening oversight. Without those safeguards, tracking the money may become guesswork, with potentially fragmented records and oversight left largely to executive discretion.
Why Companies and Japan Should Worry
A deal that unlawfully bypasses Congress cannot yield lasting promises. A future administration acting lawfully would have no choice but to unwind those arrangements unless Congress ratifies them. That reality creates serious exposure not just for participating companies but for Japan itself—risks far beyond ordinary commercial uncertainty.
Companies that accept investments, loans, or guarantees through the Japan program face significant legal and financial risk. MRA violations require that unauthorized funds be recovered and deposited in the Treasury. Contracts or obligations made without lawful authority—including those that would violate the ADA—are generally unenforceable, and any payments made without statutory authorization must likewise be recovered, even from recipients who acted in good faith. Federal agencies are required to “aggressively” pursue such collections, and a future administration would have no choice but to do so. Agreements could be repudiated, loan guarantees invalidated, and projects frozen midstream.
The fate of the SPVs is especially uncertain: a GCCA violation would potentially require the government to sever its relationship with them—dissolving the entities, allowing them to operate independently as private vehicles without federal control, or seeking explicit congressional authorization. Until that occurs, their legal status, obligations, and ability to distribute funds would remain in doubt.
Japan faces even greater danger. If the program collapses, its investments would likely be among the first casualties: loans could be accelerated, projects defaulted, and repayments suspended as the SPVs and their counterparties unravel. Beyond ordinary credit risk, however, Japan’s exposure is legal. If a future administration or Congress concludes that the program violated fiscal law, the United States would likely need to halt spending and deposit any remaining funds and proceeds in the Treasury. Even a cooperative administration might be unable to repay Japan without new legislation, potentially leaving hundreds of billions of dollars in legal limbo.
In short, Japan could lose its entire investment, and companies could find themselves holding worthless contracts. They are effectively betting that future leaders and Congress will accept as lawful what the Constitution and federal fiscal laws clearly forbid.
A Prototype for Future Deals
Since the deal was first announced, commentators have suggested that the Japan deal could serve as a prototype for deals with other countries, and the precedent may already be spreading. South Korea has been negotiating its own version and has reportedly reached an agreement with the United States this week, with President Trump announcing that a deal has been “pretty much finalized.” According to reports, the framework calls for up to $200 billion in cash installments for U.S. projects in exchange for tariff relief, with the Commerce Secretary chairing a joint investment committee and profits split evenly between the countries. Although final terms remain subject to approval by South Korea’s Seoul’s legislature and work remains ongoing, the structure closely tracks the Japanese framework, consistent with South Korea’s finance minister’s September remark that “because we know the outcome of Japan’s negotiations, we can negotiate with the U.S. based on it.” The two arrangements together would give the Trump administration control of roughly $750 billion in foreign capital without a congressional appropriation—approaching the scale of the Defense Department’s entire annual budget.
Restoring Congressional Control
The danger is not just that this arrangement could be abused, but that it could become normal. Congress should fulfill its constitutional responsibilities and protect the power of the purse from unlawful encroachment. Whatever one thinks of the underlying trade dispute, Congress should not set a precedent that future presidents can personally direct hundreds of billions of dollars in foreign-financed spending outside the appropriations process.
Beyond constitutional principle, members of Congress have a practical stake in reclaiming control over where investment flows. Hundreds of billions of dollars in projects could be placed in their states and districts without any input from their congressional representatives. It must act now either to terminate the deal or bring it under lawful control.
For this deal to comply with existing laws, Congress would need to pass a statute authorizing and governing the program’s structure and oversight. A proper framework would establish a clear governance structure for any investment vehicles receiving funds from Japan. It would also require transparent and public criteria for project selection and mandate competitive solicitations. Funding decisions would rest on objective standards, not unfettered executive discretion.
Congress would also have to require that all receipts and returns be deposited in the Treasury and that spending occur only as specifically authorized. This would preserve the profit-sharing terms with Japan while bringing the program into compliance with federal fiscal law.
Congress could also impose rigorous transparency and auditing requirements. Each vehicle should be subject to GAO audit, federal accounting requirements, and annual reporting to the appropriations committees.
Likewise, Congress could strengthen its oversight of future executive actions under the GCCA by requiring agencies to provide advance notice and a legal justification before forming any new government corporation. This safeguard would allow Congress to object before an unauthorized entity comes into existence and prevent similar end-runs around the appropriations process.
At a minimum, Congress should request a GAO opinion on whether the memorandum complies with the MRA, ADA, and GCCA. Although ADA violations have never been criminally prosecuted, a formal GAO finding that the arrangement violates the Act would put administration officials on notice. Congress could also seek information on how the administration plans to select investments and avoid conflicts of interest, or use a House resolution of inquiry to force a public discussion in committee.
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If Congress allows this arrangement to stand unchallenged, it will erode not only its power of the purse but its constitutional standing. The Framers gave Congress control over public funds to ensure no president could spend money without the consent of the people’s representatives. Whether Congress chooses to unwind the deal or to regulate it, the choice must be its own. What Congress cannot do is look away while the executive builds a government beyond the budget and a presidency beyond the law.
