Since the United States and Japan reached a trade agreement in August, there has been a lot of chatter about Japan’s commitment of $550 billion in investments in the United States. The Wall Street Journal reported: “Under the plan, the administration would use money from a $550 billion investment fund established as part of trade negotiations with Japan to invest in the development of semiconductors, pharmaceuticals, critical minerals, energy, ships and quantum computing.”

This sounds an awful lot like the president’s desire for a sovereign wealth fund. Is Japan really handing President Trump one-half trillion dollars to spend as he pleases? Whenever he wants? Where does Congress fit in this picture? (If, in fact, Congress cares. It appears uninterested in its role as outlined here.)

There are lots of questions. This is Eakinomics’ best understanding of the implementation:

1. The president designates a project.

2. Japan pays for the project. On CNBC Commerce Secretary Lutnick asserted: “After receiving Trump’s approval, the U.S. will hire construction workers and send a ‘capital call’ to Japan, he said, acknowledging that Japan has to ‘blow up their balance sheet’ and borrow money to fund the projects.” Three comments on this. First, the administration can’t just hire workers – Congress would have to appropriate funds for this purpose. Second, Japan doesn’t think this is a no-brainer. The Nikkei Shimbun noted: “The U.S. investment projects prioritize economic security and offer no guarantee of stable returns.” And The Chosun Daily offers, on that note, “[f]or example, the $139 trillion won (100 billion dollars) Alaska LNG pipeline project under U.S. consideration is unprecedented, and failure remains a real possibility.” Third, this looks sufficiently unattractive to Japan that the prime minister exited the stage after signing on to the deal.

3. A separate special purpose vehicle (SPV) will be formed for each project, and it will have a board to provide some semblance of governance. This looks like foreign direct investment into the United States. Yet this is being treated as debt financing, essentially a loan by Japan to the SPV.

4. Returns on the project are split 50-50 until Japan recoups its investment. This raises the specter of Treasury limitations on the amount of interest payments made by foreign investors to their overseas funders. Yet after the initial recoupment, the United States gets 90 percent of the returns. The U.S. returns will flow into the Treasury, but that hardly means they are available for any use. As with any funds, they will be subject to appropriation by Congress.

How should one think about this overall? First, this is not a deal; it is a steal of $550 billion. Second, there is no reason to have any faith the money will be spent wisely. Politics could easily drive the project selection, and there is no competitive pressure to keep construction or operating costs down.

The Japan agreement served as a template for a deal with the European Union and South Korea. It is worth keeping an eye on its performance.