Japan’s participation in a $40bn nuclear power project in the US is facing deadlock due to critical disagreements over legal and financial liability in the event of a potential nuclear meltdown on American soil, the Financial Times (FT) reported.
In March, Japanese Prime Minister Sanae Takaichi agreed during a visit to Washington that Japan would provide funding and industrial co-operation to build next-generation small modular reactors in Tennessee and Alabama. This was part of Tokyo’s wider commitment to invest $550bn in the US in return for lower US tariffs on Japanese exports under President Trump’s tariff regime.
The plan aims to deploy next-generation BWRX-300 small modular reactors (SMRs) in Tennessee and Alabama. GE Vernova and Hitachi are slated to lead the technical development of the reactors. However, the project is still to be finalised because of concerns by Japan about their potential liability in a nuclear accident, the FT said, citing four people familiar with the discussions.
While the US commerce department has reportedly offered verbal reassurance that the state-backed Japan Bank for International Cooperation (JBIC) and other Japanese institutions would not take on any liability for a potential nuclear accident, this promise has not been put in writing. Legal formulation of this is a process that could take months or years of complex regulatory discussion to settle, the sources noted.
In Japan’s regulatory system, nuclear plant operators shoulder liability for any accident (a highly sensitive standard codified after the 2011 Fukushima disaster). In the US, on the other hand, financial responsibility is spread across a wider range of parties, including the plant owner. The dispute is the latest obstacle to fulfilling Japan’s investment pledge. Other problems include a refusal by many Japanese industrial groups to lead projects submitted by the US, according to officials who spoke to the FT.
Although plans for two natural gas power facilities worth $33bn also agreed in March, are slowly moving forward, for the nuclear reactors, Japanese negotiators are insisting that the liability issue must be resolved before a capital call is made.
The US Department of Commerce (DOC) told the FT that Japan would have no liability because of the project’s structure and that it had relayed that message to Tokyo more than once. A DOC official said three commerce lawyers had provided a written presentation to Japanese officials earlier in July 15 explaining why the projects carried no liability for Tokyo. However, Japan remains unconvinced and is demanding legally binding, written assurances that its state-backed lenders, including JBIC, will be completely insulated from third-party liability if an accident occurs.
Beyond the deadlock over commercial meltdown liability, several strategic, military, and diplomatic nuclear issues are creating underlying friction in the US-Japan alliance. There are core differences over uranium enrichment between the US and Japan focused on Washington’s push to completely sever reliance on Russian fuel.
In early 2026, the US Export-Import Bank (EXIM) issued $2.4bn in potential financing to back American startup General Matter in exporting US-enriched uranium to Japanese utilities. Historically, Japanese utilities relied on third-party deals – including agreements with Russia’s Atomenergoprom – to enrich uranium recovered from fuel sent to Europe. While Tokyo agrees with the strategic goal of minimising reliance on Moscow, Japanese utilities are highly sensitive to the higher costs and logistical pivots associated with fast-tracking alternative American supply chains.
The US wants Japan to ramp up domestic enrichment to alleviate strain on Western markets, but local Japanese regulators refuse to rush safety approvals. Under their current 123 Agreement, the US grants Japan rare “blanket consent” to enrich uranium and reprocess spent fuel. The US traditionally guards this right fiercely, requiring a “Gold Standard” (complete bans on domestic enrichment) for other allies, such as South Korea.
While the US wants Japan to be a robust, self-sustaining nuclear partner, Japan’s domestic enrichment programme is significantly delayed. Japan Nuclear Fuel Ltd (JNFL) operates a commercial enrichment plant at Rokkasho, but due to ultra-strict post-Fukushima safety standards and technical hurdles, only one out of its seven centrifuge cascades is currently operational.
Construction on the Rokkasho reprocessing and enrichment hub began in 1993, but the facility is decades behind schedule. It is currently facing its 28th operational postponement. JNFL’s latest five-year roadmap pushes the target for initial plutonium extraction (reprocessing) back to the second half of fiscal year 2027. This continued domestic gridlock leaves Japan dependent on foreign supply chains, directly undermining Washington’s broader strategic goal of fast-tracking allied energy independence.
Tensions increased recently after the Trump administration signed a controversial multi-billion-dollar US-Saudi civil nuclear deal that included feasibility studies for uranium enrichment on Saudi soil. Although this deal is now unlikely to go through, after Trump changed the conditions, the erosion of the “Gold Standard” deeply unsettled non-proliferation advocates in Tokyo, who believe loosening of enrichment guardrails for geopolitical leverage will trigger a volatile regional arms race.
The deal also sparked intense anger in South Korea, which viewed it as a blatant double standard, given that South Korea has spent decades adhering the Gold Standard under its own Section 123 Agreement. South Korea is aggressively pressing to remove US veto powers over its fuel cycle. But is the US grants South Korea the right to enrich its own fuel, Japan’s exclusive status as the only non-nuclear-weapon state with US reprocessing and enrichment rights will effectively end. It is reported that protests from Japan and #South Korea were instrumental in influencing Trump to change the conditions of the Saudi deal, although Israel pressure was undoubtedly the main factor.
