The Battle for Rare Earths

Japan wants to end its rare earth dependence on China. Rare earths are critical materials in most smartphones, computers, electric vehicle batteries, medical devices, and defense systems. China accounts for the majority of mining and processing these vital elements.

This week, Economic Security Minister Sanae Takaichi announced that Japan is designating rare earths as “strategically critical.”

Its decision is sure to get Beijing’s attention, as Japan has an estimated 16 million tons of rare earth metals near the Ogasawara Islands and Minamitorishima, part of its Exclusive Economic Zone. Accessing the materials will take time, with an estimated five-year time frame until prospecting can begin.

While Beijing has yet to make a public statement regarding Japan’s policy shift, Strike Source’s research on the Chinese Internet shows China allocating more resources toward rare earth development.

In December 2022, China Northern Rare Earth and China Steel Research Group announced plans to launch a new company to implement Beijing’s rare earth development strategy. The company’s prime focus will be an innovation center in Baotou, Inner Mongolia, responsible for major decisions in China’s rare earth market. China also has other rare earth innovation centers throughout the country.

Its rare earth capital, Baotou, has 48 other rare earth projects under construction for a total investment of 12.2 billion yuan in the last year. Baotou refers to the number of a projects as a “record high.”

In contrast, Japan has one research center to study rare earths, Muroran Materia, part of the Muroran Institute of Technology.

In December 2022, Muroran helped develop a technology to extract neodymium, a rare earth used in hybrid vehicles, wind turbines, surgical lasers, and computer hard drives.

It remains unclear how much investment Japan intends to allocate for rare earths.

The Takeaway

Tensions between Japan and China will likely increase in the near future. Japan’s policy shift on rare earths also comes after referring to Beijing as the “greatest strategic challenge” ever. Further, earlier this month, Japan announced its plans to acquire preemptive strike capability and cruise missiles.

Beijing sees these decisions as threats to its influence over the rare earth market and as a national security risk. China could potentially block rare earth exports to Japan. If it chooses to do so, Japan could follow suit, as China is it its number one trading partner.

Japan has the potential to become a rare earth resource for the U.S. and other countries that rely on China for such materials. As a result, Beijing could disrupt the rare earth supply chain while its major influence in the market remains or try to sabotage Japan’s rare earth research.