As China continues to control rare earth supply, Japanese business communities are increasingly warning about rare earth issues.
On July 7th, Reuters reported that recent documents from Japanese companies indicate that the shortage of key minerals is beginning to affect Japan's overall economy. This has heightened the urgency for the government led by Yoshihiko Kuroda to find alternative sources.
Japan relies heavily on imports in the field of key minerals. After China tightened its export controls, Japan has been suffering greatly and continues to struggle. Reports indicate that concerns among Japanese companies regarding key minerals have increased to an unprecedented level, signaling warning signs for the coming quarters.
According to Reuters, over the past decade, Japanese companies have reported the use of rare earths in their documents submitted to the Tokyo Stock Exchange less than 40 times per month, and this use has mainly been in materials and industrial applications. However, since May of this year, the number of such reports has doubled, and consumer and electronics companies are increasingly considering the supply of rare earths as a risk factor.
Data shows that in nearly 200 documents mentioning rare metals in May and June, more than two-thirds of the companies stated that Chinese export controls are currently having or may have a negative impact on their businesses in the future.
Mitsubishi Research Institute's Chief Economist, Toyosef Takasaka, stated that in 2010, when China introduced export control measures towards Japan, the Japanese economy suffered a blow equivalent to about 0.9% of GDP. Given the increasing importance of rare earths in various supply chains today, the impact could be even more severe.
"With the development of artificial intelligence (AI), rare earths are being widely used in various goods and throughout the supply chain," said Dong Shenze. Electric vehicles have also joined this trend, and Japanese companies cannot afford to take it lightly.
Le Tian Securities Analyst Yoshida Tetsu stated that although the impact on different industries is not uniform, the problem is spreading.
Supply is being restricted, but all industries are beginning to utilize rare earth — which will only exacerbate the scarcity of these materials,” Yoshida added. As of 2025, China controls roughly 70% of global rare earth output and 60% of its reserves.
Data shows that China has cut off the supply of key materials such as yttrium, gallium, dysprosium, and thulium to Japan. Reuters mapping
In November last year, tensions between China and Japan escalated. As soon as Kaoru Yosidai took office, she made statements about a potential "Taiwan crisis," and has also engaged in frequent military provocations. The Chinese side has taken several measures in response.
According to a report by Nikkei Asia earlier this year, China announced in January this year that it would strengthen the export control of dual-use goods to Japan, thereby increasing economic pressure on Japan. Especially in March and April this year, China's exports of rare earths to Japan plummeted by more than 80% year-on-year. This forced Japanese companies to quickly seek alternative suppliers from countries like Australia and India.
However, finding alternative solutions is not easy.
Yuri Group CEO Yuri Hanbur stated that it is unclear when these efforts will yield results and to what degree they will achieve success.
"I estimate that one year of export restrictions will create a major problem; it has already gone by four to five months," he told Reuters, "Obviously, the Japanese government wants to cover this up and avoid panic, while allowing China to gain an early victory."
