“Absolutely unacceptable and extremely regrettable,” Japanese Chief Cabinet Secretary Minoru Kihara called China’s decision to impose new export rules aimed directly at Japan. This concerns restrictions on the export of so-called dual‑use-goods – technologies and materials that can be used for both civil and military purposes.
The Chinese measure is a new step in a row that has been going on for weeks between the two countries over a statement by Japanese Prime Minister Sanae Takaichi. It said in November that a Chinese attack on Taiwan would pose a “potentially life-threatening situation” for Japan. In doing so, she suggested that Japan could become militarily involved in a conflict around Taiwan.
Beijing reacted angrily and demanded that the prime minister take back her words, but she has so far refused. “Japanese leaders have recently made incorrect statements about Taiwan,” he said the Chinese Ministry of Commerce the measures on Tuesday. That is “blatant interference in China’s internal affairs” and to protect China’s national security it therefore bans the supply of all dual use-goods to the Japanese armed forces, for military purposes, or ‘for any use contributing to the increase of Japan’s military strength’. Although a ministry spokesperson said on Thursday that civilian trade is not covered by the restrictions, the vague wording gives Beijing enough room to increase pressure as it sees fit.
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The sanctions therefore raise concerns in Tokyo, especially because China according to state media is now considering further restricting the export of rare earth metals. These raw materials are crucial for Japanese industry, including for electric cars, wind turbines, medical equipment and computer chips. Last year, Beijing successfully used such export restrictions as a weapon in the trade war with the United States.
A piece of monazite in the Geological Museum of China in Beijing. Various rare earth metals are extracted from the mineral, including cerium, lanthanum, and neodymium.
Photo Maxim Shemetov/Reuters
Disputed Islands
“It is an effective tool against Japan,” said Masayuki Masuda, head of the China department at Japan’s National Institute for Defense Studies. “But it is unlikely that China will resolve the conflict in this way.”
This is not the first time that China has used economic pressure in this way. In 2010, a similar situation arose following an incident near the disputed Senkaku Islands, which are administered by Japan but which China also claims as the Diaoyu Islands. A Chinese fishing boat rammed into a Japanese coast guard ship, causing the Chinese to be arrested.
China demanded his release and almost immediately began slowing rare earth exports to Japan, under the guise of administrative proceedings. Chinese cities broke out, Japanese companies were attacked and Japanese cars were destroyed.
The export ban hit Japan hard. The prices of these raw materials multiplied and factories experienced supply problems, causing production lines to shut down. Ultimately, Japan filed a complaint with the World Trade Organization (WTO). Tokyo agreed: China had acted contrary to the rules of free trade, and Beijing eventually withdrew the measures. But the lesson was clear. “Since then, economic security has been a permanent part of Japanese government policy,” says Masuda.
Earth metals from our own seabed
The Japanese Ministry of Economy (METI) then set up various programs to reduce this dependence on China. For the coming year alone, the ministry has reserved more than 177 billion yen (973 million euros) to strengthen economic security.
For example, Japan is trying to develop alternative import channels. JOGMEC, a specially established government fund focused on energy and metal security, invested more than 20 billion yen (over 130 million euros) in mining projects in countries such as Australia, Canada, Vietnam, India and Kazakhstan in 2023.
Japan is also focusing on technological solutions in its own country, such as the reuse of rare metals from used electronics, for which more than 5 billion yen was released in 2023 (about 34.5 million euros at the time). And in the remote archipelago of Minamitorishima, rich metal deposits have been found in the seabed, including cobalt, nickel and rare earth metals. The government is now working with national universities to develop technologies that can extract these raw materials from its own seabed.
China is now openly using its economic power to get its way
The government is also trying to help companies in strategic sectors such as semiconductors, batteries and aviation parts further reduce their dependence on China with subsidies and tax breaks, and with stricter supervision of foreign takeovers and investments.
Yet that dependence remains high. “In 2010, more than 90 percent of rare earths came from China, which is now about 60 percent,” says Masuda. “That’s much better,” he says. But according to the Nomura Research Institute, a three-month export ban could still cost Japan around 660 billion yen, which amounts to about 3.6 billion euros. At e
There is therefore growing fear in Tokyo that China will further expand its measures. According to Yoshiaki Takayama, economic security expert at the Japan Institute of International Relations (JIIA), there is a chance that Beijing will even include products with a possible military application under export rules.
Cars from the Japanese manufacturer Subaru are ready for export at the port of Yokohama. Chinese restrictions on the export of rare earth metals could cause serious problems for the Japanese car industry.
Photo Issei Kato/Reuters
“Ordinary electronics can also be affected,” says Takayama. “It is still unclear how strictly China will enforce this.” No list of companies or users has yet been published, which he believes is a conscious choice: “This way Beijing keeps control over who they want to hit.” This vagueness creates uncertainty among Japanese companies: “But if China names names, they risk that companies will already withdraw their investments.”
For the time being, it remains unclear what the precise consequences will be for Japan. “We do not yet know how great the economic impact will be,” concludes security expert Masuda. “So far the effects seem to be not too bad. But one thing is clear: China is now openly using its economic power to get its way.”
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