CNA Few countries are better prepared against China threatening their rare earth supplies than Japan, says David Fickling for Bloomberg Opinion.
David Fickling 09 Jan 2026 05:59AM(Updated: 09 Jan 2026 09:30AM)
SYDNEY: To a hammer, every problem is a nail. If your most potent means of geopolitical leverage is threatening supplies of high-strength magnets, rare earth elements will always be the solution.
That’s the latest approach Beijing is taking in its dispute with Tokyo sparked by comments from Japanese Prime Minister Sanae Takaichi about the possibility of military conflict over Taiwan. Exports of all items with potential military applications to Japan will be immediately banned, China’s Ministry of Commerce said on Tuesday (Jan 6).
The most obvious victim of this threat will be rare earth magnets made with the elements neodymium and praseodymium, and increasingly spiced up with rarer samarium, dysprosium and terbium. They’re used everywhere from charging cables to the switchgear in wind turbines to motors powering electric vehicles, missile guidance systems and aircraft flaps.
JAPAN IS PREPARED
There’s just one problem: Few countries are better prepared against China threatening their rare earth supplies than Japan. Thanks to similar threats in 2010 prompted by a standoff over disputed islands, it has spent years diversifying its supply chains and building up stockpiles for precisely this sort of eventuality.
While China produces about 80 per cent of the world’s neodymium magnets, Japan on its own manufactures about half of the remainder, according to UBS SuMi TRUST Wealth Management – levels far above its own roughly 5 per cent share of global manufacturing.
That’s left Japan relatively unharmed by previous threats to this supply chain. Consider the last time China last put the chokehold on rare earth exports, during the tit-for-tat trade disputes prompted by President Donald Trump’s “Liberation Day” tariffs last year: Washington was forced to negotiate for magnet supplies, a humiliating denouement that cemented Beijing’s control over a vital advanced technology. Shin-Etsu’s magnet factory kept operating at full capacity, the company told investors in July 2025.
Other markets found themselves caught in the crossfire. Only about a quarter of export license requests by European manufacturers were being processed by Chinese authorities, a trade association for local auto-parts companies warned in June 2025. As a result, production lines and plants were being shut down, even though European companies had no beef with Beijing.
The same was true in India. “We are managing on a daily basis” by drawing on local stocks for magnets in vehicles such as the electric iQube scooter, KN Radhakrishnan, President of TVS Motor, told investors in July.
The more pronounced export crackdown promised by Beijing’s latest move may be harder to withstand. Despite the diversification of the past decade, Japan still depends on China for about 70 per cent of its rare earth supplies, according to a government raw materials agency.
Incentives for companies such as the Japanese-funded Lynas Rare Earths have succeeded in broadening the sources of supplies of neodymium and praseodymium, but have been too slow in doing the same with harder-to-obtain samarium, dysprosium and terbium. The deposits are out there, however.
GLOBAL RENAISSANCE IN PRODUCTION
China’s actions over rare earths in recent years have not sparked the cowed reaction Beijing might have hoped for, but instead a global renaissance in production that will erode its dominance. Following Japan’s lead, facilities designed to circumvent its influence on rare earth magnet supply chains are sprouting up on every continent: from the US to France, South Korea, India, Malaysia, Australia, Estonia, Germany, Brazil and Angola.
ADVERTISEMENT
Rare earth facilities are complex, and often unprofitable in the absence of the sort of government support announced over the past 12 months. They’re still orders of magnitude easier to establish than the supply chains needed to churn out the most advanced three-nanometer computer chips that China can’t obtain. That makes them a weaker tool of geopolitical statecraft than Beijing may hope.
Canada’s Neo Performance Materials took just 500 days to build a rare earth magnet plant in Estonia that opened in September 2025, with commercial sales due later this year. After starting a production line for the relatively abundant elements neodymium and praseodymium at its site in France last April, Belgium’s Solvay SA is already producing rarer samarium and will begin output of the most-prized dysprosium and terbium this year.
Nervous analysts over the past year have pointed to a quote from Deng Xiaoping as evidence of Beijing’s long-term masterplan: “The Middle East has oil; China has rare earths.” A better guide might have been another line often attributed to the former premier: “Hide your strength, bide your time.”
In so nakedly showing off its control of critical minerals, Beijing has inspired rival facilities to emerge around the world. That will leave it far weaker in the long term.
Source: Bloomberg/el
CVD 