Following Japan's Lead: China's Rare Earth Hardball Tactics Accelerate Global "De-Chinaification"
PM Takaichi's Taiwan Comments and China's Retaliation
In November 2025, Japanese Prime Minister Sanae Takaichi's parliamentary statement suggesting that a Taiwan contingency could trigger Japan's exercise of collective self-defense rights ignited fresh tensions with Beijing. In response, China has deployed a series of "economic coercion" measures, including travel advisories discouraging Chinese tourists from visiting Japan and reinstating bans on Japanese seafood imports.
On January 6, 2026, China's Ministry of Commerce announced enhanced export controls on dual-use items destined for Japan. While specific product lists remain unspecified, analysts suggest rare earth elements (REEs) are likely included, sending ripples of concern through Japanese industry.
What Are Rare Earths: The "Vitamins" of Modern Industry
Rare earths comprise 17 metallic elements essential to modern technology: electric vehicle motors, wind turbine generators, smartphones, MRI machines, and even missile guidance systems. Their ability to dramatically enhance product performance in small quantities has earned them the moniker "industrial vitamins." Neodymium magnets, in particular, are the world's strongest permanent magnets and hold the key to EV proliferation.
Currently, China accounts for approximately 70% of global rare earth mining and over 90% of refining capacity, making this dominance a potent geopolitical weapon.
The 2010 Wake-Up Call: Japan's First-Mover Experience
Japan was the first nation to experience China's weaponization of rare earths.
In September 2010, following the arrest of a Chinese fishing boat captain after a collision with Japanese Coast Guard vessels near the Senkaku Islands, China effectively halted rare earth exports to Japan. At the time, Japan depended on China for approximately 90% of its rare earth imports, throwing its automotive and manufacturing sectors into panic.
From this crisis, Japan swiftly formulated a national strategy built on four pillars.
1. Supply Diversification
Japan's Organization for Metals and Energy Security (JOGMEC) and trading house Sojitz invested approximately $250 million in Australia's Lynas Corporation, building a supply chain independent of China. Lynas is now the largest rare earth producer outside China, supplying about one-third of Japan's rare earth needs. Japan also strengthened partnerships with Vietnam, India, and Kazakhstan to spread supply risk.
2. Alternative Technology Development
Japanese companies including Shin-Etsu Chemical, Proterial (formerly Hitachi Metals), and Daido Steel have focused on technologies to reduce rare earth usage and develop magnets completely free of heavy rare earths like dysprosium and terbium. Daido Steel has commercialized "heavy rare earth-free" neodymium magnets, targeting independence from heavy rare earths that remain 100% sourced from China.
3. Strategic Stockpiling
Through JOGMEC, Japan expanded its strategic rare earth reserves to approximately 60 days' supply (42 days national stockpile plus 18 days private sector), enhancing resilience against short-term supply disruptions.
4. Recycling Promotion
Japan advanced technologies to recover rare earths from used products, leveraging domestic "urban mines." Shin-Etsu Chemical established a recycling facility in Vietnam, building a circular supply chain.
These efforts reduced Japan's rare earth dependence on China from 90% to approximately 60%. In neodymium magnet production, while China commands about 80% of global output, Japan alone produces roughly half of the remainder (approximately 10%)—a remarkably large share compared to Japan's overall 5% share of global manufacturing.
Shin-Etsu's Resilience: Full Production Even in Crisis
In April 2025, when China curtailed rare earth exports amid tit-for-tat tariffs with the United States, American automakers were forced to halt production. Meanwhile, Japan's Shin-Etsu Chemical reported to investors in July that its magnet factories "continued operating at full capacity."
This is clear evidence that preparations since 2010 have paid off, demonstrating Japanese companies' "learning effect."
Why the World Is Following the "Japan Model"
Each time China deploys rare earth restrictions, more nations look to Japan's approach as a template.
United States
President Trump signed an executive order in March 2025 for "emergency measures to increase mineral production." The US also concluded a "Minerals Resources Agreement" with Ukraine to secure critical minerals including rare earths. Reactivation of California's Mountain Pass mine and magnet supply chain development in Texas and North Carolina are underway.
Australia
The government has committed AUD 1.25 billion to build domestic rare earth refineries. Following Japan's JOGMEC model, Australia aims to create an integrated supply chain from mining to refining.
Europe
Japan's JOGMEC has participated in rare earth refining investments in France's Carémag, advancing international cooperation. The EU has also developed its own critical minerals strategy, promoting stockpiling and alternative technology development.
Saudi Arabia
With support from the Public Investment Fund (PIF), Saudi Arabia has announced plans to build a "mine-to-magnet" integrated rare earth supply chain.
The Royal United Services Institute (RUSI) in the UK has praised Japan's JOGMEC as a "model for successful supply chain diversification," recommending that other nations study its methods.
Economic Impact Assessment
According to estimates by Takahide Kiuchi of Nomura Research Institute, if China maintains rare earth export restrictions for three months, Japan's economic loss would be approximately ¥660 billion (0.11% of GDP). If restrictions continue for one year, losses could reach approximately ¥2.6 trillion (0.43% of GDP).
However, having built resilience since 2010, Japan is relatively less vulnerable than before. Kohei Okazaki of Nomura Securities also suggests that "economic losses limited to rare earths would be relatively contained."
Minamitori Island: A Potential Game-Changer
Japan holds a potential trump card for the future. Beneath the seafloor approximately 6,000 meters deep near Minamitori Island lie rare earth mud deposits estimated to meet global demand for hundreds of years. Test mining is scheduled to begin in January 2026, with full-scale extraction trials planned for 2027. While commercialization is projected for 2028 or later, success could dramatically improve Japan's rare earth self-sufficiency.
Is China's "Economic Coercion" Backfiring?
Intriguingly, each time China plays the rare earth card, the global "de-risking" movement accelerates. A Tokyo-based consultant describes export controls as "a bell that cannot be unrung."
Even after relations with China improved following the 2010 embargo, Japan never relaxed its diversification strategy. This lesson is now being shared with the United States and Europe.
Looking Ahead: Japan's Preparedness Put to the Test
PM Takaichi's cabinet approval rating has remained above 70% even after her November 2025 remarks, suggesting that China's economic pressure has had limited effect on softening Japan's stance toward Beijing.
However, the economic impact of declining Chinese tourist arrivals may intensify going forward, and the trajectory of Japan-China relations remains uncertain. Economic security issues including rare earths are expected to be agenda items at G7 finance ministers' meetings, with Japan's experience and strategy continuing to attract international attention.
Japan learned from its crisis 15 years ago and has steadily built its defenses. Resilience against the "weaponization" of rare earths cannot be constructed overnight.
How does your country discuss and prepare for critical resource supply risks? Please share your thoughts in the comments below.
References
- https://news.yahoo.co.jp/articles/6e16235093088a2d15aeb7861a50dec3b279d64e
- https://www.nri.com/jp/media/column/kiuchi/20251128_2.html
- https://www.nri.com/jp/media/column/kiuchi/20260107.html
- https://www.spf.org/spf-china-observer/document-detail071.html
- https://www.dlri.co.jp/report/macro/560809.html
- https://www.weforum.org/stories/2023/10/japan-rare-earth-minerals/
- https://www.rusi.org/explore-our-research/publications/commentary/japans-responses-chinas-supply-chain-dominance
- https://www.newsecuritybeat.org/2024/08/how-to-diversify-mineral-supply-chains-a-japanese-agency-has-lessons-for-all/
- https://moderndiplomacy.eu/2026/01/12/japan-launches-deep-sea-rare-earth-mission-as-china-tightens-supply-grip/
Reactions in Japan
As someone who remembers the 2010 rare earth shock, I'm proud of Japan's foresight in continuing countermeasures since then. Our 15 years of stockpiling and diversification strategy is now being put to the test.
Working on EV motor design, and Daido Steel's heavy rare earth-free magnets are truly a lifesaver. Achieving both performance and de-Chinaification is a testament to Japanese technological prowess.
While PM Takaichi's remarks did provoke China, playing the rare earth card repeatedly only heightens Japan's sense of crisis. It looks like self-harm on China's part.
Even at 60%, China dependency is still too high. Heavy rare earths are nearly 100% from China. We need to accelerate deep-sea resource development near Minamitori Island.
It's great news that JOGMEC's approach is becoming a global model. However, we mustn't forget China's 90% share of refining. Securing refining capacity, not just mining, is urgent.
I support PM Takaichi. There's no reason Japan should face economic sanctions just for discussing Taiwan contingency preparedness. This is a good opportunity to show Japan's resolve.
I think PM Takaichi's remarks lacked diplomatic consideration. Of course China's overreaction is also problematic, but was it necessary to provoke them deliberately?
It's reassuring to hear Shin-Etsu Chemical continues at full capacity. Private sector crisis management is indeed crucial. We can't rely on the government alone.
It's ironic that America is now looking to Japan's model. Back in 2010, the US was largely indifferent, and now they're scrambling.
Rare earth-related stocks are rising across the board. Keep an eye on Daido Steel, Proterial, and Sojitz. Crisis equals opportunity.
Small parts manufacturers like us can't stockpile. Big companies may be prepared, but looking at the entire supply chain, there are countless vulnerable spots.
I hope they conduct proper environmental impact assessments for Minamitori Island deep-sea mining. Resource security is important, but we mustn't disregard impacts on deep-sea ecosystems.
Using rare earths as a diplomatic card reminds me of the oil shock. Back then, Japan also led the world in energy-saving technology. History repeats itself.
Honestly, I had no idea about 2010. Learning this background changes how I see current news completely. Very educational.
China must be troubled internally too. Rare earth restrictions are a double-edged sword, damaging their own export industry and only accelerating the de-China trend.
I was working at a trading company in 2010. I still remember the chaos. JOGMEC and Sojitz's decision to invest in Lynas was truly the right call.
As an American, it's embarrassing that while Japan has been preparing for 15 years, we did almost nothing. We're only now getting serious in 2025, but it feels too late. We should seriously study the JOGMEC model.
As an Australian, I'm proud of our cooperation with Japan through Lynas. The Mount Weld mine and Malaysian refinery are a successful example of a China-independent supply chain. We want to strengthen this partnership going forward.
Germany's auto industry is seriously dependent on China. We should have advanced heavy rare earth-free magnet technology like Japanese companies. It's not too late to learn from Japan and build an EU-wide strategy.
It's good news that JOGMEC is investing in France's Carémag. Europe alone cannot build refining capacity. International cooperation is the solution to this problem.
From Taiwan's perspective, PM Takaichi's remarks were reassuring. While deteriorating Japan-China relations aren't desirable, Japan's statement about Taiwan contingency shows solidarity with us.
Korea also has high rare earth dependence on China. It's no coincidence this announcement came during President Lee's China visit. We should learn from Japan and accelerate Korea's diversification strategy.
RUSI's analysis is spot on. The UK is considering critical mineral stockpiling, but we haven't achieved a systematic approach like Japan. We need to establish a dedicated agency like JOGMEC.
India has its own rare earth resources but lags in refining technology. We should deepen cooperation with Japan and advance technology transfer. The IREL-Japan contract was a good start.
Brazil has heavy rare earth deposits. The US is eyeing us as an alternative to China, but there should be room for cooperation with Japanese companies too. We want to leverage South America's potential.
The Dutch high-tech industry also depends on Chinese rare earths. ASML's semiconductor equipment uses rare earth magnets. The EU needs a strategy modeled on Japan's approach.
Canada has abundant mineral resources but lacks refining capacity. Like Japan, we need public-private partnerships to build refining facilities. This is a national security issue.
As a Chinese person in Singapore, I have mixed feelings. China's rare earth strategy may be effective short-term, but long-term it will only lose market share. I think Japan's response is correct.
New Zealand is a small country, but through cooperation with Australia and Japan, we could become part of the supply chain. We should strengthen Pacific regional cooperation.
Sweden has confirmed critical mineral deposits in the north. We could be key for the EU, but balancing with environmental regulations is challenging. We want to learn from Japan's recycling technology too.
News of Saudi Arabia entering the rare earth supply chain is intriguing. As part of the Middle East's post-oil strategy, cooperation with Japan should be considered.
This is an important issue for Ireland's high-tech industry too. As an EU member, we want to strengthen ties with Japan and Australia and contribute to supply chain diversification.