TOKYO - China’s tightening grip on rare earth exports is emerging as a fresh pressure point for Japan, with manufacturers warning that shipments have slowed to a trickle and analysts estimating that a yearlong disruption could erase years of the country’s already thin growth.
The concern has sharpened as Beijing moves to restrict exports of items it says could support military use, with Japanese trading companies and magnet makers describing a de facto halt in supplies that extends beyond narrowly defined defense-related materials. Rare earths are used across a wide swath of products, including smartphones, automobiles and medical equipment, and powerful magnets made with rare earth elements are central to electric motors and other industrial applications.
A television program reporting from the supply chain said a Japanese magnet manufacturer was still receiving only about one-third of what it had ordered as of January 15th, before the situation worsened further in the following two weeks, with the company later saying deliveries had “almost stopped.” The firm also said that rare earth-related output at its China-based operations could no longer be shipped to Japan, adding to the squeeze on domestic production.
While China has argued that non-military export applications should be approved, industry participants said procedures have become heavier and approvals slower, creating what amounts to an export stoppage in practice. Analysts on the program suggested the disruption may be driven not only by formal directives but also by risk-averse behavior inside China, where companies and local officials may avoid taking actions that could be viewed as politically out of step, effectively delaying shipments without issuing an explicit rejection.
Japan’s ability to endure a prolonged cut-off remains the key question, because stockpiles are finite and costly. The Economy, Trade and Industry Ministry has said the basic policy is to hold about 60 days’ worth of strategic reserves, while specialists noted that some private companies may hold inventories that stretch longer, though carrying large volumes ties up cash and raises storage and financing burdens. Experts on the program argued the government may need to expand subsidies and support for stockpiling and alternative procurement.
The macroeconomic stakes could be significant if the disruption persists. An estimate cited on the program suggested that even if the impact is minimal for an initial period of months due to stockpiles, a full year of export stoppage could shave 0.88% off Japan’s GDP, and an economist said that, given Japan’s low potential growth rate, the loss could amount to wiping out more than a decade of incremental growth.
The pressure is arriving alongside broader regional tension, with the program linking the tougher trade environment to a chill in Japan-China relations after remarks in Japan’s legislature on a Taiwan contingency, and to Beijing’s long-running effort to tighten control over rare earth mining, processing and exports. Commentators said China has sought for years to prevent Japan from building comfortable buffers, recalling how Japan accelerated diversification and stockpiling after export disruptions around the Senkaku Islands dispute in 2010, and suggesting that Beijing has since worked to ensure any future squeeze bites faster by keeping supply “just tight enough.”
A separate development underscoring the security backdrop is the reported mass gathering of Chinese fishing vessels in the East China Sea, which researchers cited on the program said reached roughly 2,000 boats across a wide area from the early hours of December 24th through the afternoon of December 25th, with another concentration of about 1,400 vessels seen around January 10th. Analysts suggested such formations could be used to rehearse large-scale mobilization of maritime militia-like forces and to test tactics that could complicate navigation routes for tankers or other shipping, even if alternative routes exist.
For Japan’s manufacturers, the immediate challenge is replacing supplies that have been dominated by China for decades. Companies interviewed said they are exploring sourcing from countries such as Australia and Vietnam, but the cost is far higher, with one executive saying prices could be roughly double, making a rapid switch difficult without public support or price increases passed on through the supply chain.
The debate now is whether the current squeeze is a short-lived signal or the start of a longer reset that forces Japan to accelerate “de-risking” of critical materials, expand recycling and substitution technologies, and deepen partnerships with alternative producers, even as it tries to stabilize a relationship with its largest neighbor that has become increasingly entangled with security and geopolitics.
Source: TBS
