Prime Minister Sanae Takaichi and US President Donald Trump hold the agreements they have just signed. At the State Guest House in Moto Akasaka, Tokyo, October 28. (©Getty via Kyodo)
A new milestone has been set for the Japan-United States alliance, potentially elevating the relationship to new heights. During US President Donald Trump's first visit to Japan of his second term in October 2025, two major agreements on trade and critical minerals were signed in Tokyo.
In exchange for a 15% tariff on Japanese exports, the first agreement provided for $550 billion USD in Japanese investments in the US. Meanwhile, the second agreement established a framework to secure the supply of critical and rare earth minerals through strengthened cooperation in mining and processing. It establishes a framework agreement to secure supplies of critical minerals and rare earths.
It also seeks to boost supply chain resilience for materials vital to the production of electronics and advanced technologies, including derivative products such as permanent magnets, batteries, catalysts, and optical materials.
The agreement holds immense significance. It creates an alternative supply chain at a time when global competition over rare-earth minerals is intensifying ー and China controls around 70% of global mining and nearly 90% of refining capacity for these elements.
Recently, Beijing expanded export controls, requiring government approval for any products containing even a trace of rare earths. As rare-earth elements are essential to advanced technologies, including smartphones, electric vehicles, and military aircraft, Tokyo and Washington must develop a counterstrategy. Building alliances and ramping up domestic production seem viable options for securing access to rare-earth elements and critical minerals.
This article examines the deal and its potential implications for the Japan-US partnership.
What It Entails
For the partnership, the set of Japan-US trade and investment agreements offers a new perspective and a fresh lease of life. It capitalizes on existing critical minerals and rare earths mining and processing capacities that the US and Japan already have. Moreover, it includes developing new capacities to re-industrialize, revitalize, regain economic momentum, and reshore.
By expanding and coordinating these operations, both countries aim to achieve resilience and security in the supply chains, including mining, separation, and processing. This would also support domestic industries — including advanced technologies and their respective industrial base — by leveraging policy tools such as each country's financial support mechanisms, targeted trade measures, and critical minerals stockpiling systems.
The motive is to transform the individually focused national programs into a collective security framework. Several joint projects have been undertaken.
The Rapidus Collaboration
For instance, the Rapidus chip venture was founded by seven Japanese companies, including Softbank and Toyota, in collaboration with the US company IBM. It aims to manufacture two-nanometer chips with a subsidy of ￥920 billion JPY ($5.8 billion) in 2027. This signifies a strategic effort to regain leadership in advanced semiconductors, which are crucial to AI, cloud, automotive technology, and next-gen technology.
The collaboration leverages IBM's technology, with Japanese firms investing heavily to build cutting-edge fabrication plants, making chips faster, smaller, and more efficient. This is vital for future digital economies.
Similarly, as per the Joint Fact Sheet, a Japanese company would participate in a project to build a copper production and smelting facility in the US. Furthermore, Mitsubishi Heavy Industries and Toshiba Corp. would be involved in a project led by the US firm Westinghouse to build next-generation nuclear plants, valued at up to $100 billion.
This is a win-win for both, as US companies like Lynas Rare Earths and MP Materials are expanding domestic processing and magnet production capacity, supported by government backing. Japanese firms such as Hitachi Metals, Sojitz, and Shin-Etsu Chemicals bring decades of experience in rare earth separation and magnet fabrication.
Getting to Mineral Security
The initiative also mobilizes government and private-sector support, including for capital and operating expenditures, through grants, guarantees, loans, equity, offtake arrangements, insurance, and regulatory facilitation. As a result, Japan's role in global supply chain reorganization is elevated, with strengthened coordination in industrial policy between the US and Japan.
In addition, the framework involves convening a bilateral ministerial on mining, minerals, and metals investment. This would be established to promote dialogue with relevant stakeholders and identify priority areas for investment.
The US-Japan Critical Minerals Supply Security Rapid Response Group is another entity that would be established. In this case, it would sit under the leadership of the US Secretary of Energy and Japan's Minister of Economy, Trade, and Industry. It would identify priority minerals, supply vulnerabilities, and develop a coordinated plan to accelerate the delivery of processed minerals under the framework.
The deal gives rare recognition to the inclusion of joint geological mapping and recycling initiatives. This reflects the importance of knowledge and circularity in securing mineral security.
Identifying Alternatives
Japan recognized its mineral vulnerability earlier than other countries. The Senkaku Islands dispute with China in 2010 was a turning point that led to an abrupt Chinese export ban on rare earth elements. This episode exposed the fragility of the Japan-US framework, paralyzing its high-tech, automotive, and defense industries.
One outcome is that Japan considers mineral supply chains as strategic infrastructure. It has since built a strategy centered on public–private collaboration, patient capital, and international partnerships. Tokyo is also pursuing domestic resource development, including test mining rare-earth-rich seabed mud near Minamitorishima Island in early 2026. This dual-track strategy aims to secure access to critical minerals through a whole-of-value approach.
Ramping Up Ties
The recent Japan-US agreement reflects Washington's growing efforts to reduce its dependence on China for vital resources that power everything from electric cars to fighter jets. It also marks a coordinated push to diversify sources of rare earth materials across the Indo-Pacific.
Earlier, Trump announced an $8.5 billion framework agreement with Australia, followed by memoranda of understanding with Malaysia and Thailand. This pact with Japan was confirmed just days later. It intends to reaffirm the US strategic commitment to Japan as both countries navigate the shifting power balance in Asia.
Washington's efforts to diversify and create alternative supply lines, and to leverage new networks with trusted allies, are already reshaping the strategic dynamics with China. Nevertheless, production will take time to materialize, and the looming tariff threat persists.
The US has been Japan's top priority, and the two agreements have signaled a rebranding of the relationship, resetting the alliance. This has accelerated the pace of bilateral ties with general acceptance.
Furthermore, Tokyo has pledged to set up an investment facility at a state-owned development bank, Japan Bank for International Cooperation, and Nippon Export and Investment Insurance to support a $550 billion investment package in American industries under the September 4 trade deal. It includes strategic US investments to be made by January 2029, both loans and guarantees, focused sectors such as chips, pharmaceuticals, energy, metals, and shipbuilding. This reflects growing confidence in the American partnership, transcending the tariff threat.
Supply Chain Security
The new avatar of the Japan-US partnership seeks to play a larger role on the regional and global stage. With the US having only one operational rare-earth mine, it is intensifying its partnerships with allies to secure access to the vital minerals.
This agreement is positioned as a critical component of the rebranded ties. As part of their deal, the US and Japan agreed to streamline and deregulate permitting timelines and processes for critical minerals and rare earths, and to address non-market policies and unfair trade practices. Both countries would consider a mutually complementary stockpiling arrangement and would cooperate with other international partners to ensure supply chain security.
These steps would ensure coordinated investment and a commitment to collaborate on mining and processing. Furthermore, this would potentially boost the manufacturing ecosystem in the wider Indo-Pacific region.
American-Japanese collaboration is essential for two reasons. First, mineral development is extraordinarily capital-intensive. Exploration budgets alone can reach hundreds of millions of dollars per project, with no guaranteed return. China outspends all other countries on exploration, resulting in long-term dominance.
Second, coordinated investment vehicles (including joint offtake agreements and shared strategic reserves) could transform national programs into a genuine collective security framework. This requires the US, Japan, and their partners to co-finance exploration beyond late-stage mining and processing, which depend on the same critical inputs. Among the prioritized rare earth elements are graphite, gallium, germanium, nickel, and rare-earth elements.
A Game-Changer
The agreement could be a game-changer, creating an alternative supply chain among like-minded countries focused on multiple nodes and operations across the world.
It further deepens Japan's strategic alignment with the US amid intensifying competition with China. Promoting shared strategic infrastructure, it lays an institutional foundation to enhance end-to-end supply chain resilience through shared stockpiling, joint project financing, investment guarantees, and offtake mechanisms.
While the US-Japan partnership under the mineral agreement seeks to go beyond aspirations and business-as-usual, the test lies in delivery. Execution remains the defining variable as the agreement. Clarity on financing mechanisms, project timelines, and regulatory coordination remains to be announced. Evolution into a genuine alternative will depend on alliances with sustained investment, industrial execution, technological depth, and control of the value chain.
RELATED:
- Investing in Security and Success: Analysis of the US-Japan $550 Billion Strategic Investment Fund
- United on Rare Earths Needs, Nations Can Move Away from China
- Rare Earths and Japan's Deep-Sea Economic Security Test
Author: Varuna Shankar
Varuna Shankar is an associate fellow at India's World Magazine and a Non-Resident Vasey Fellow at Pacific Forum.
