Government-Business Alliance Forms to Strengthen Supply Chains
On January 19, 2026, Japanese Prime Minister Sanae Takaichi met with Keidanren (Japan Business Federation) Chairman Yoshinobu Tsutsui at the Prime Minister's Office to discuss strengthening supply chain resilience. During the meeting, Takaichi requested the business community to "advance efforts toward supply chain strengthening so that critical materials do not become overly dependent on specific countries."
In response, Chairman Tsutsui stated that "the business community will also work on diversification of procurement while emphasizing strategic benefits." The two sides agreed on government-private sector cooperation to strengthen supply networks. At the conclusion of the meeting, Prime Minister Takaichi indicated she would "proceed with representations to China in coordination with like-minded countries," signaling diplomatic efforts alongside economic measures.
Background: China's Escalating Export Restrictions
This meeting comes against the backdrop of China's intensifying export restrictions against Japan. On January 6, 2026, China's Ministry of Commerce announced it would strengthen export controls on dual-use items to Japan, effective immediately. This measure is widely seen as retaliation for Prime Minister Takaichi's parliamentary statement on November 7, 2025, in which she said a Chinese invasion of Taiwan could constitute a "survival-threatening situation" for Japan.
While China has not specified the affected items, experts believe rare earth elements are likely included. Chinese state media has reported on plans to strengthen rare earth export controls, raising concerns about serious impacts on Japanese industry.
Understanding Rare Earths and Their Importance
Rare earth elements comprise 17 metallic elements essential to modern high-tech products, from electric vehicle (EV) motors and smartphones to wind turbine generators, medical equipment (MRI machines), and aerospace and defense applications.
Of particular concern are "heavy rare earths" such as dysprosium and terbium, which are necessary for neodymium magnets used in EV motors. Japan depends on China for nearly 100% of these materials. China controls approximately 70% of global rare earth production and over 90% of refining and processing, giving it significant economic and diplomatic leverage.
Japan's China Dependency and Economic Risks
Following China's export restrictions during the 2010 Senkaku Islands incident, Japan learned a hard lesson and has since worked to diversify its supply sources. As a result, China's share of Japan's rare earth imports has decreased from about 90% to approximately 60%.
However, according to Nomura Research Institute estimates, a three-month rare earth export restriction could cost the Japanese economy approximately 660 billion yen ($4.2 billion) and reduce annual GDP by 0.11%. If restrictions continued for one year, losses could reach 2.6 trillion yen with a GDP impact of 0.43%.
Key industries at risk include:
- Automotive: Neodymium magnets in EV and hybrid vehicle motors
- Electronics: Smartphones, semiconductor manufacturing equipment, hard disk drives
- Renewable Energy: Large wind turbine generators
- Medical Equipment: Powerful magnets in MRI machines
- Aerospace and Defense: Aircraft engines and defense-related equipment
Japan's Four-Pillar Strategy
The Japanese government and industry have been addressing the rare earth challenge through four main strategies.
1. Supply Source Diversification
Trading company Sojitz and JOGMEC (Japan Organization for Metals and Energy Security) have invested in Australia's Lynas Corporation, securing contracts for up to 65% of heavy rare earths refined at Lynas's Malaysian plant for Japanese supply. In 2025, Japan also invested in France's Caremag, expecting to eventually secure 20% of Japan's heavy rare earth demand.
2. Domestic Rare Earth Development
The seabed within Japan's Exclusive Economic Zone (EEZ) around Minamitorishima (Marcus Island) contains world-class rare earth mud deposits. In January 2026, JAMSTEC (Japan Agency for Marine-Earth Science and Technology) began test mining using the deep-sea drilling vessel "Chikyu." This unprecedented attempt to extract resources from approximately 6,000 meters depth aims for commercialization after 2028.
3. Alternative Technology Development
Research continues on motors and magnets that don't require rare earths. However, commercialization remains distant, and practical alternatives will take time to develop.
4. Recycling Promotion
Technologies for recovering rare earths from used electronic devices are advancing, with hopes of utilizing "urban mines" as a resource.
Strengthening International Cooperation: Japan-U.S. Partnership
In October 2025, Prime Minister Takaichi and U.S. President Trump signed an agreement on critical mineral supply, including rare earths. The United States is also working to reduce China dependency, strengthening cooperation with Australia, Malaysia, and Thailand. Supply chain construction among allies, centered on Japan and the U.S., is accelerating.
Future Outlook and Challenges
The Minamitorishima rare earth project is extremely important for Japan's economic security, but numerous technical and economic challenges remain before commercialization. Extraction from 6,000 meters depth is a world first, and competing with Chinese rare earth prices appears difficult.
However, this is an investment in economic security. Building resilient supply chains free from any single country's control is significant not only for Japan but also for friendly nations with similar concerns.
The Takaichi administration has made clear its stance of firmly responding to China's "economic coercion" while pursuing both supply diversification and domestic production to protect Japan's industrial foundation.
How is your country discussing the diversification of critical material supply sources? What do you think about the risks of China dependency for rare earths and other strategic resources? We'd love to hear your perspective in the comments.
References
- https://news.yahoo.co.jp/articles/ad404eb0b8c8bb099fca52de95318c13eba50e89
- https://thediplomat.com/2026/01/how-will-chinas-new-export-controls-impact-japan/
- https://www.cnn.com/2026/01/06/business/china-japan-export-controls-intl-hnk
- https://www.jamstec.go.jp/j/about/press_release/20251223/
- https://www.spf.org/spf-china-observer/en/document-detail062.html
Reactions in Japan
Finally feels like the government is getting serious with PM Takaichi's meeting with Keidanren. Rare earths are the lifeline of industry. Having China holding us by the neck is really dangerous.
China tightening restrictions just as Minamitorishima rare earth development ramps up - they must be getting nervous too. We absolutely need to push forward with domestic production.
Right direction from an economic security perspective, but costs will increase short-term. Worried about the burden on SMEs. Government support measures needed simultaneously.
Lessons from the 2010 Senkaku incident aren't being applied. Still 60% dependent after 15 years... Should have acted much sooner.
Work at an automaker and there's serious concern internally. If rare earths are cut off during the EV shift, it's really bad. Supply diversification can't wait.
The restrictions are because of Takaichi's Taiwan comments, right? Couldn't diplomacy have been handled better? It's too late once the economy is affected.
Reassuring that Keidanren is on board. Can't counter China without public-private unity. I believe in Japan's technological capabilities.
Mining from 6000m depth is an incredible technical challenge. Go Chikyu! Japan's future depends on it.
Also hoping for recycling tech development. There's even the term 'urban mining' - can extract from old smartphones right? Should be able to improve recovery rates.
Honestly, even if deteriorating relations with China is unavoidable, couldn't it have been handled better? Citizens will definitely bear the economic pain.
The Japan-US rare earth agreement is good news. Allied nations have to work together to break free from China dependency.
Tourism down, seafood blocked, now rare earths... I support the Takaichi administration's stance on China, but we need to be prepared for the magnitude of impact.
Domestic production movement for rare earths following semiconductors. Looking forward to Japanese manufacturing revival! But need simultaneous talent development or tech will hollow out.
My company already started reviewing supply sources. Natural business decision, but costs will definitely rise... Might be passed on to consumers.
I appreciate not yielding to China's economic coercion. But the impact on industry is serious. Government needs to provide solid support.
Japanese researchers are working hard on rare earth-free magnets. Want to see the underlying strength of a technology nation.
Supply chain resilience is essential for Taiwan contingency preparedness too. I think Takaichi's words and actions are consistent.
660 billion yen loss doesn't hit home, but hearing EVs can't be made makes the seriousness clear. Wonder if Toyota is okay...
From an American perspective, Japan's rare earth diversification is a welcome move. We face the same problem. If Japan-US cooperation can break China dependency, it's win-win for both nations.
German auto industry also depends on Chinese rare earths, so Japan's situation isn't someone else's problem. EU needs to seriously consider alternative supply sources too.
Japan's investment in Australia's Lynas is good for us too. Strengthening rare earth supply chains in the Pacific region leads to stability for the entire region.
Japan calls China's export restrictions 'economic coercion,' but Japan made provocative statements on Taiwan first. Isn't this self-inflicted?
Korea's China dependency is even higher than Japan's. We're watching Japan's response closely. Supply chain diversification is an urgent issue for Korea too.
Japan's technological prowess in attempting 6000m deep-sea mining is impressive. If successful, it could open a new era of ocean resource development. Other countries are watching.
Japan's investment in France's Caremag is good news for Europe's rare earth industry too. Could become a model case for international cooperation to diversify away from China concentration.
India is positive about critical mineral cooperation with Japan. Countering China's dominance requires democratic nations working together. Japan-India cooperation has great potential.
As a Taiwanese, I support PM Takaichi's statement. Taiwan Strait security matters to Japan too. Please don't yield to China's economic threats.
Critical mineral supply diversification is a global trend. Japan taking the lead provides a case study that other countries can reference.
Environmental impact should also be considered. Deep-sea mining could affect marine ecosystems. Balancing economic security with environmental protection is important.
Latin America also has rare earth deposits. Japanese investment would contribute to our economic development. We're ready to be diversification partners.
From Poland's view, China's economic coercion isn't just Japan's problem. Europe learned the hard way from Russia energy dependence. Supply chain diversification is every democracy's challenge.
Singapore as a small nation is directly affected by resource competition between major powers. Countries like Japan diversifying supply chains expands options for the whole region.
Canada has critical mineral reserves too. This could be a good opportunity to deepen cooperation with Japan. We welcome strengthening ties among democracies.
As a Chinese person, rare earths are an industry China developed through years of hard work, enduring environmental pollution. Other countries suddenly saying 'break free from dependency' seems selfish.
As a Middle Eastern oil nation, I understand the difficulty of using resources as diplomatic cards. Japan's diversification is understandable, but dialogue-based solutions should also be explored.