China has issued restrictions on exports of rare earths and rare-earth magnets to Japan, escalating a diplomatic dispute triggered by remarks on Taiwan from Japanese Prime Minister Sanae Takaichi in November. The restrictions could be a major blow to Japanese manufacturers that supply components to global semiconductor, automotive, and defense industries.
Following Takaichi’s comment that Japan could become involved over a conflict between Beijing and Taipei, the Chinese government has demanded a retraction, which Takaichi has declined to issue.
According to exporters and people familiar with the policy, who spoke with the Wall Street Journal, China has halted approvals for export licenses covering heavy rare earths and magnets across Japanese industry, not limited to defense firms. Earlier this week, Beijing also announced a broad ban on exports of “dual-use” goods to Japan.
The restrictions show that China is willing to use dominance in critical minerals as geopolitical leverage. While Japan is a leading producer of rare-earth magnets, it is heavily dependent on China for the raw materials.
Japanese officials have protested the measures, warning of serious consequences for global supply chains. Prolonged restrictions could cost Japan billions of dollars and have spillover effects on industries worldwide.
