China vs. Japan: Beijing Weaponizes Critical Minerals Against Tokyo

China has restricted the export of critical minerals to Japan, including tungsten, dysprosium, and terbium, as part of a calibrated economic response to Japanese government statements regarding Taiwan. Since late 2025, shipments of these materials—essential for high-performance magnets and automotive manufacturing—have seen sharp declines or complete halts, according to trade data and industry reports.

Did You Know? Despite current tensions, Japan has managed to reduce its dependency on Chinese rare earth imports from 90% during the 2010 Senkaku/Diaoyu islands crisis to approximately 65% today, according to industry data.

Origins of the Trade Restrictions

The current trade impasse began in November 2025, following comments by Japanese Prime Minister Sanae Takaichi. Takaichi told Parliament that a Chinese invasion of Taiwan would threaten Japan’s survival, potentially triggering a military response. Beijing responded by suspending travel, restricting Japanese seafood imports, and ultimately issuing a January 2026 directive banning the export of dual-use goods to Japan.

By February 2026, the Chinese government identified 40 Japanese companies subject to additional trade restrictions. The measures appear designed to pressure the Japanese administration to retract its stance on Taiwan while avoiding a broader escalation that might draw in Washington, according to trade analysis.

Industrial Impact on Japanese Manufacturing

The automotive sector, which accounts for roughly 10% of Japan’s GDP, faces significant production challenges due to the scarcity of tungsten used in precision tools. Masayoshi Matsumoto, CEO of Sumitomo Electric Industries, stated at an industrial exhibition in Beijing that the prolonged supply interruption will negatively affect Japanese manufacturing.

Companies are now pivoting toward recycling to maintain operations. Mitsubishi Materials currently uses recycled material for 70% of its input and aims to reach 100% by 2030. These adjustments are necessary because China continues to control approximately 70% of global rare earth mining and over 90% of the refining and magnet manufacturing capacity.

Expert Insight: The Strategy of Ambiguity

Beijing’s current approach mirrors the 2010 embargo but is notably more surgical. By maintaining a trickle of supply for certain light rare earths, China is likely attempting to maximize economic pressure on Prime Minister Takaichi without triggering a total diplomatic rupture. The effectiveness of this strategy depends on whether Japanese firms can scale recycling and alternative supply chains before the supply gap forces a deeper industrial contraction.

Frequently Asked Questions

What specific materials are affected by the export restrictions?
Exports of intermediate forms of tungsten have dropped to zero since early 2026. Shipments of dysprosium and terbium, used in electric vehicle magnets, stopped in October 2025, while itrium exports fell to 1.13% of the previous year’s volume.

Why has the diplomatic channel between the two nations stalled?
The bilateral relationship is severely strained following Prime Minister Takaichi’s comments on Taiwan. According to sources cited by Bloomberg, the Japanese ambassador in Beijing has repeatedly requested meetings with the Chinese Ministry of Foreign Affairs without receiving a response.

What is Japan’s long-term strategy to counter this dependency?
Japan is working to reduce its reliance on any single country for rare earths to under 60% by 2030, in line with G7 commitments. The government is also prioritizing internal recycling, price reserves, and diversifying suppliers through agreements with countries like Australia and Canada.

Will the acceleration of recycling and supply chain diversification be sufficient to protect Japan’s industrial output if the trade restrictions remain in place indefinitely?