Giant rare earth mining site in Inner Mongolia Autonomous Region, China, is a reminder of the economic vulnerability of Western economies. (©Kyodo)
このページを で読む
Whether in bilateral talks or at multilateral conferences, critical minerals are now almost always on the agenda whenever economic security is discussed. That is especially true of rare earths, which are essential for high-tech equipment.
The reason is China. Beijing holds overwhelming control over rare-earth supplies and has repeatedly used that dominance for economic coercion.
Last year, it countered the Trump administration's tariffs by restricting rare-earth exports. It also tightened export controls on dual-use goods to Japan, including rare earths, after objecting to Prime Minister Sanae Takaichi's remarks on a Taiwan contingency.
China has long used these minerals as a tool of coercion to bend other countries to its will. Over the past year, Beijing appears to have rediscovered just how effective that leverage can be—and, emboldened by the results, is now weaponizing it even more aggressively.
Digging Out of Dependence
How, then, should Japan respond? The government is rushing to secure alternative sources as it seeks to build supply chains. In February, Japan succeeded in test-mining rare-earth mud lying 6,000 meters below the sea off Minamitorishima. The development eventually seeks to establish a domestic supply system.
Some efforts could also help Japan secure supplies in the near term. Last October, exports of heavy rare earths to Japan began under a project involving the Japan Organization for Metals and Energy Security (JOGMEC), Sojitz, and an Australian partner. The minerals were mined in Australia and separated and refined in Malaysia.
A separate Japan-France joint project is building a smelting plant in France. Cooperation on the project was confirmed at the bilateral summit in April. The plant is expected to begin operating at the end of 2026, and Japan will secure some of the heavy rare earths it produces.
Heavy rare earths, such as dysprosium, are especially scarce, and China's monopoly over them is even stronger than that of light rare earths. The benefits of the two projects with Australia and France are therefore significant. Together, they are expected to cover a sizable share of Japan's demand for heavy rare earths.
In March, Toyota Tsusho announced that it would join a JOGMEC project surveying a rare-earth mine in Namibia, a country in Southern Africa. According to JOGMEC, it is also conducting exploration in places other than Namibia.
Breaking Free Isn't Cheap
Similar efforts are underway in the US and Europe. But catching up with China will not happen quickly. Bringing such projects to commercial viability requires significant investment, which means higher prices. Chinese rare-earth prices are already low, and a supply glut could drive them even lower.
China controls every stage of the process, from mining to exports, through the state. It could also arbitrarily cut prices to hurt other countries. Moreover, its production process has faced criticism for lax environmental standards and poor labor conditions.
Other countries hope to build a market based on more sustainable production. But that alone is unlikely to stop cheap Chinese products from flooding in.
"Without a mechanism to support purchases of rare earths from outside China, the system will not last," says Kotaro Shimizu, principal researcher at Mitsubishi UFJ Research and Consulting.
One proposal under discussion by Japan, the US, and Europe is to set a minimum price for critical minerals. Under the system, tariffs and other measures would be imposed on rare-earth imports below a certain price threshold.
The US has floated the idea, and the Japan-US Action Plan on Critical Minerals, issued during the March summit between the two leaders, indicates the two sides will discuss its feasibility.
A United Front on Rare Earths
Still, many hurdles remain. Even if countries support the purchase of more expensive rare earths from outside China, the supply chain does not end there. For example, some of those materials are used to make magnets, which are then incorporated into motors for electric vehicles and other products.
Unless those higher costs can be passed on reliably at each stage, parts makers and other suppliers will be left to absorb the burden. Japan has many small and midsize companies involved in these intermediate stages, leading Shimizu to caution that "Japan could end up bearing the greatest risk."
To avoid that, automakers and other companies that make final products would have to commit to procuring more expensive parts. But that understanding is not yet shared across industries.
In the past, similar moves gained momentum in the US and Europe to exclude cotton from China's Xinjiang region from the market because of suspected forced labor. Japan and its partners should deepen discussions on whether a similar approach is feasible for rare earths.
Governments will also need to determine whether tariffs, subsidies, or even some form of state trading in critical minerals offers the best way to close the price gap with China. The issue must be examined through the lens of both free trade and economic security. Measures to expand demand will also be needed to prevent oversupply.
France has proposed creating an international organization to provide financial support for critical minerals and monitor supply chains at a meeting of G7 trade ministers. However, some countries are cautious about establishing a new body that would require them to contribute personnel and funding. Washington opposed the proposal.
Even so, unity is essential to building resilient supply chains. Unless concrete measures are put in place quickly, countries will remain dependent on cheap Chinese products and continue to face economic coercion.
RELATED:
- Rare Earths and Japan's Deep-Sea Economic Security Test
- Rare Earths: Japanese Companies Race to Break Free from China's Dominance
Author: Hideyuki Hasegawa, The Sankei Shimbun
(Read this article in Japanese)
このページを で読む
