How a Trade Deal With Japan Could Change the Face of U.S. Energy -- Barrons.com

By Avi Salzman

President Donald Trump never got Mexico to pay for his border wall, but he's having a surprising amount of success getting Japan to pay for America's artificial-intelligence data center buildout.

Japan has already approved government loans for three gargantuan natural-gas plants in Ohio, Texas, and Pennsylvania. If they opened today, they'd be the three largest gas plants in American history, powerful enough to provide all the electricity needed by both New York City and Los Angeles on an average day. All three are expected to power AI data center complexes.

The projects and the financing schemes behind them are unlike anything seen before in the U.S. Japan has agreed to commit as much as $550 billion on American infrastructure by the end of Trump's term in return for a relatively low base tariff rate of 15%, down from its pre-deal rate of 25%. The outlines of the deal were struck a year ago, but it has largely faded from public view since.

It's reasonable to be skeptical that Japan will advance the full sum, which equates to some 12% of its annual gross domestic product. Trump's plans for U.S. investments by other countries have sometimes flamed out, as in the case of a $10 billion factory that Chinese manufacturer Foxconn said it would build in Wisconsin during his first term. But these Japanese investments look to be firmer.

There is now real money involved. U.S. and Japanese officials spent months hashing out concrete investments, including the big gas plants. Japan's state-run bank has approved billions of dollars worth of loans to a half-dozen projects, and a state-run credit agency agreed to insure loans provided by private banks, which are expected to be counted as part of Japan's investment.

"We need to take this seriously," says Jefferies analyst Julien Dumoulin-Smith, who covers electricity markets. Dumoulin-Smith thinks the fact that these plants have the explicit backing of the White House-and are located on federal land, in the case of the Ohio plant-gives them an advantage over many privately funded projects at a time when data centers are facing a wave of political pushback. "It creates a real overlay of credibility."

The Japan deal upends the traditional ethos of American capitalism-that financing flows to the projects expected to produce the highest returns. Instead, under the terms of the Japan agreement, the U.S. president must personally sign off on each project. That gives him the power to determine which states-and potentially which companies-get to profit off the AI buildout. "Whatever Donald Trump wants to build, the Japanese will finance it for him," said Commerce Secretary Howard Lutnick in a TV interview.

It's in line with Trump's vision of state-directed capitalism that has also resulted in the government taking direct financial stakes in companies. Dumoulin-Smith says the danger is that government-directed investment ends up crowding out private investment in new energy projects. It's notoriously tough to compete with Uncle Sam, particularly if the government has access to low-interest loans. There's another twist, too. Once these plants are constructed, the government-not the companies that built them-is expected to own them.

For the companies on the right side of Uncle Sam, however, the Japan-U.S. deal could result in a new source of funding. American, Japanese, and even Canadian firms are in line to profit. Florida-based NextEra Energy will build and operate the plants in Texas and Pennsylvania. Natural-gas producer Comstock Resources has been tapped to provide natural gas to the Texas project. Other producers, like Expand Energy, are well positioned to sell their output to the Ohio plant, through pipelines operated by companies like Enbridge and TC Energy, which are based in Canada but own major pipelines in the area. Certain utilities will profit; Ohio-based utility American Electric Power will be in charge of building out $4.2 billion worth of transmission lines.

Japan expects the agreement to help Japanese companies, too, portraying the investments as a way to expand the reach of its own supply chains. One of the investments it announced is for a set of new, small nuclear reactors built in Tennessee and Alabama by a joint venture owned by GE Vernova and Japanese company Hitachi. The reactors could cost as much as $40 billion, though there's still little evidence the project has progressed. GE Vernova told Barron's, "We have continued to work closely with both governments to advance the projects."

The Ohio natural-gas plant, located on the site of a Cold War-era uranium enrichment plant, is the largest project of all so far, and arguably the most complicated. Spread across three square miles of public and private land, it is expected to eventually host 9.2 gigawatts of electricity capacity, more than twice as much as the biggest existing natural-gas plant in the U.S. The total price tag is estimated at $33 billion. It will power a data center complex stocked with Nvidia chips and potentially costing hundreds of billions of dollars.

The project is backed by a who's who of international tech giants. The data center site is being developed by SB Energy, a U.S.-based affiliate of Japanese tech company SoftBank Group that recently filed to go public. OpenAI has signed a 20-year lease to use the data center, which itself is backed by a commitment from Nvidia to take over a portion of the lease under certain circumstances, such as an operator default.

The government of Japan is already putting money in. The state-owned Japanese Bank for International Cooperation approved loans for $630 million, and private-sector banks will lend it another $1.26 billion, insured by Japan's Nippon Export and Investment Insurance. If all goes right, the first data centers could start operating by 2028.

Japan also approved loans to the natural-gas projects in Texas and Pennsylvania, which would be built by NextEra, one of the country's largest power developers. The Texas plant is expected to be built in rural Anderson County in the eastern part of the state, though the exact location hasn't yet been identified. It could produce as much as 5.2 gigawatts of electricity, or enough for around two million people. The Pennsylvania one is expected to be built in a valley south of Pittsburgh.

NextEra spokesman Neil Nissan said the company has received the first $3.3 billion as part of the trade deal, including loans from Japan's state bank, as well as loans from Citibank and JPMorgan Chase that are insured by the Japanese government. The money will be split between the two projects and go toward down payments on equipment like turbines, Nissan said. The company is aiming to get the first power online by 2028. Under the arrangement, NextEra is expected to build and operate the plants, while the government will eventually own them.

These projects have some major advantages compared with your average AI power project. They have government support, financing, and, in at least one case, tech companies ready to pay up for the power. At the same time, the projects face serious risks.

The most prominent risk is political. Politics helped this deal come together, and politics could tear it apart as U.S. and Japanese administrations change.

Dennis Wamsted, an analyst with the nonprofit Institute for Energy Economics and Financial Analysis, doesn't think the plants will be built at anywhere near the size that headlines imply, if they are built at all. "This is a classic example of spending other people's money," he says. "I think that's going to be a hard sell in a year, or maybe even in six months after the midterms."

There has been some grumbling about the arrangement in Japan. The terms of the trade deal give almost all of the upside from the projects to the U.S. Cash flows from the investments are split 50/50 until Japan recoups its initial investment plus interest, at which point the split changes to 90/10 in favor of the U.S. Takahide Kiuchi, an economist at the Nomura Research Institute and a former member of the Bank of Japan's policy board, wrote last year that the financing structure appears to heavily favor the U.S. Representatives for the Japanese government and the U.S. Department of Commerce didn't respond to requests for comments on the deal.

Experts in Japanese politics say the Japanese public so far doesn't seem concerned with the agreement. New Prime Minister Sanae Takaichi has a close relationship with Trump and remains popular, says Marcel Thieliant, head of Asia Pacific at Capital Economics. Still, Thieliant thinks the glow of this arrangement could fade as the politics change.

There are operational risks, too. Deal documents leave holes. For instance, SB Energy was listed by the Commerce Department as the operator of the Ohio plants, but its own securities filings say "no specific operator or power seller has been finally designated."

Japan's state bank could also face pressure based on the environmental impact of its investments. The bank's stated mission includes preserving the environment, and "preventing global warming" is part of that. But the U.S. gas plants it is funding will spew substantial planet-warming emissions. Even excluding potential methane leaks, the three natural-gas plants could be expected to emit 54 million metric tons of greenhouse gas emissions per year, or more than the entire country of Portugal, according to Eric Gimon, a senior fellow at climate-focused think tank Energy Innovation. Asked about the emissions, the Japanese bank said it can't comment on individual projects, but remains committed to a goal of net zero emissions in financial investments by 2050.

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September 16, 2026 10:46 ET (14:46 GMT)