Lessons From Japan on Tackling China’s Rare Earth Dominance

This month, for the umpteenth time, the world, and specifically the West, has been pulling its hair out over China’s rare earths dominance. It’s a problem we’ve heard of time and time again for the past three or so years. After all, this group of just 17 minerals is crucial for producing so much, from smartphones to missiles.

But, truth be told, experts around the world have been worrying about Chinese rare earth dominance for a decade and a half at least.

One of the earliest instances of Beijing using its stronghold on rare earth supply chains to twist arms of other nations was way back in 2010 when a maritime accident sparked off intense diplomatic tension between China and Japan. Beijing responded by stopping the exports of the critical metals to Japan, which depended on its neighbour for more than 90% of its rare earth needs.

Eventually tensions between the two calmed and China lifted its trade restrictions. But for Japan, the episode became an alarming wake up call. So, Tokyo proceeded to put together a 100 billion yen package to take three key steps to solve its China-dependance problem.

One, it began scoping for alternative sources of rare earths, at home — particularly from the seabed within its exclusive economic zone — and from outside too, specifically with its ally Australia. Two, it began focusing on finding ways to cut back on its use of rare earths, while working to identify their potential alternatives. And Three, it began developing know-how in recycling rare earths, such as extracting them from electronic waste.

If you were expecting a miraculous supply chain shift at this point in this story, you’ll be in for a disappointment. But it is still a story of significant wins. According to Tatsuya Terazawa, the chairman and CEO of Japan’s Institute of Energy Economics, Tokyo has effectively reduced its dependence on China for rare earths from 90% to 60%.

In Australia, the miner that Japan invested in — Lynas Rare Earths — has become the largest producer of separated rare earths outside of China. Lynas still sends oxides to China for refining, but it also has a refining plant in Malaysia, where just this year it said it had produced a heavy rare earth element for the first time. The miner provides about 90% of Japan’s supply of neodymium and praseodymium — two rare earths used for making high-power magnets that are critical to making electric vehicles and powering the assembly lines needed to produce them (among other things). In 2023, Lynas CEO Amanda Lacaze told Foreign Policy that Japan had to “hold our hands quite tightly for the first five years” to achieve this result.

Meanwhile, Japan has also managed to halve its consumption of rare earths compared to 2010 — a striking feat at a time when global demand for these metals has only grown. Even Toyota — the world’s biggest carmaker — has found a way to reduce the use of rare earths in EV motors.

And, Japan’s focus on steering this shift has also created a slew of opportunities for it. Countries across the world now seek Japan’s expertise in recycling rare earths from e-waste — an arena that still leaves a lot to be desired and has scope for many more breakthroughs.

For those in need of diversifying their rare earth supplies, the main lessons from this story are that of money and patience.

Countries across the world need to find allies that can provide them with rare earths, but also rich countries – specifically in the West – need to put in real budgets to help make that happen. Asia, of course, can be a key destination for these investments, as we report below.

And the fact that doing so would take time should not stop diversification efforts. Japan began trying to build rare earth independence more than 15 years ago and it clearly still has a long way to go.

But if you see that in context of China’s rare earth journey — which began as far back as in the 1950s — you realise 15 years is not necessarily that long at all.

Asia at the centre-stage ⛏️ 

Another key lesson that the events since 2010 can teach us is that China can always be expected to use its rare earth dominance to fight its trade and diplomatic battles. Even now, China has only partially eased up in its crackdown on rare earths.

In an editorial on Thursday, Beijing’s mouthpiece China Daily said that China’s policies around controlling the supply of rare earths “are taken with the purpose of safeguarding resources and national interests, reflecting a long-term strategy for strengthening security and boosting sustainable development.”

“It should be clear to all countries that as long as entities are not engaged in activities that undermine China's sovereignty, national security or development interests, the export control measures will not affect their normal business operation,” it said in conclusion.

That explains why analysts worry that Beijing will continue to leverage this dominance in future crises. But countries looking to diversify their supply chains — even if by a fraction — may not have to wander outside of Asia.

The continent is, in fact, already at the centre stage of the rare earth hustle. For instance, in West Asia, US President Trump has just linked with Saudi Arabia to help develop an alternate rare earth supply chain. Meanwhile, in Central Asia — a region already coveted for its rare earths — Kazakhstan announced this week it had discovered 11 rare earth deposits. Those reserves could place it high on the list of the countries with the biggest rare earth deposits in the world.

Also in Southeast Asia, Malaysia, Thailand and Vietnam all play a decent role in the global rare earth supply chain. Former US President Joe Biden attempted to tap that during his visit to Vietnam in 2023. And alongside them, countries like India are now also focusing on joining in the rush for these critical elements.

Will these options break China’s dominance of the rare earth supply chain anytime soon? Certainly not, considering there are too many issues that plague their production — such as pollution that can often be catastrophic for the ecosystem surrounding their mines, or a shortage of talent and skill necessary to do the tough job of separating and refining rare earths. In fact, China continues to be at the centre of all mining processes because it has found a way around these issues.

But diversifying supplies from across Asia could definitely allow the world to even out the playing field.

• Sales of iPhone-maker Apple plunged nearly 50% in China in March while those of its biggest rival, Huawei, surged.

• China and Russia have announced a plan to build a nuclear reactor on the moon by 2035. It would be built autonomously, i.e., without humans.

• US President Donald Trump says he will allow the UAE to buy some of the most advanced artificial intelligence chips from American firms.
  

• And India is looking to levy import duties on some products made in the US, suggesting it wants a better trade deal with Trump.