On July 21, the Japanese newspaper Kyodo News cited trade statistics released by the Chinese General Administration of Customs yesterday. It was reported that China's exports of rare earth magnets to Japan in June amounted to 128 tons, which is a 5-ton increase from the previous month, but still remains at a low level. Meanwhile, China's exports globally in June increased by approximately 19% compared to the same period last year.
According to reports, as of February, China’s monthly exports of rare earth magnets to Japan have consistently exceeded 200 tons. In March and April, the exports dropped to over 180 tons, and from May onwards, they fell to over 120 tons.
In terms of rare metal-related products that are dual-use items, the exports of tungsten carbide and tungsten powder to Japan remained zero in June, following zero exports from February to May.
Reports indicate that this situation may be affected by China's export controls on dual-use items to Japan, which were implemented in January.
In November last year, tensions between China and Japan escalated. As soon as Kaesuke Asao took office, she made statements about a “Taiwan incident,” and also engaged in frequent military-related activities. The Chinese side has taken several measures in response.
According to a previous report by Nikkei Asia, in March and April of this year, China's exports of rare earths to Japan dropped by more than 80% year-on-year.
A Tokyo-based supply chain risk management company, Resilire, conducted an online survey in June among the decision-makers of 400 manufacturing companies that purchase rare earths and rare earth materials. The survey found that the procurement costs of rare earths for Japanese companies have increased by more than one-fifth since last year, reflecting the impact of China’s export restrictions.
In companies with rising cost reports, only 4.2% indicate they can almost fully transfer the entire increase to customers. Approximately 10% of companies express that they are completely unable to transfer. Plus, adding in those who answered "transfer proportion is less than 25%" and "25%-49%", indicates that over 40% of surveyed companies' cost increases were transferred less than half.
The average proportion of rare earth procurement from China is 61%.
Resilire's representative stated: "China's export restrictions in 2025, compounded by the growth of electric vehicle and renewable energy demand, further intensified upward price pressure."
Previous analysis indicated that Japan’s domestic reserves of heavy rare earths would be largely depleted by the end of 2026. A senior executive of a large Japanese manufacturer expressed concerns: “If this situation continues, Japan’s domestic production will be disrupted, and factories may be forced to shut down.”
Japan's RISE Institute chief economist, Mitsuo Higashizawa, said that during the period when China introduced export control measures against Japan in 2010, Japan's economic loss amounted to about 0.9% of its GDP at that time. Now, the importance of rare earths in various supply chains has changed significantly, and it is foreseeable that the impact will be even more severe. According to calculations by the Nomura Research Institute in Japan, if the supply cut continues for three months, Japan's economic loss would be approximately 660 billion yen (1,000 yen is roughly equivalent to 417 yuan). If the situation lasts for one year, this figure could surge to 2.6 trillion yen.
In this context, ensuring a stable supply of key minerals has become an urgent task for the Japanese government, who have turned their attention to used air conditioners.
According to the All Japan News Network (ANN), Japan will extract rare earths from obsolete household air conditioners for the first time. Japanese media claim that this is an attempt by Japan to reduce its dependence on China, given China's continued efforts to strengthen export controls over Japan.
Japanese reports of video screenshots
According to reports, Mitsubishi Electric has taken the lead in implementing this project. The recycling work is carried out by different professional companies according to specific processes. The main procedure involves removing the compressor from the recycled outdoor unit and disassembling it. Then, magnets containing rare earth elements such as neodymium are extracted and refined before being reused in product manufacturing.
According to estimates, through this recycling system, approximately 35% of the rare earths required for air conditioner manufacturing can be replaced by recycled materials.
However, it is worth mentioning that the disassembly of household appliances is difficult and costly, and there are also challenges related to the recovery rate and purity of rare earth elements. According to reports, a single inverter air conditioner contains only about 20 to 30 grams of rare earths. To extract 1 kilogram of rare earths, dozens of used air conditioners need to be disassembled. The rare earth elements recovered are mainly neodymium and other light rare earths, with a purity of less than 80%. Mitsubishi Electric plans to recycle about 230,000 air conditioners each year. Based on this, it is estimated that several tons of rare earths can be recovered annually. However, Japan consumes about 20,000 tons of rare earth magnets each year, which is far from enough to address the immediate needs.
According to Reuters, a project leader supported by the Japanese government said that Japan will begin testing the mining of rare earth-containing silt at the deep-sea bottom near Minamitoro Island next January. Japanese media estimate that, based on an average annual consumption of 20,000 tons, the reserves of rare earths in the waters near Minamitoro Island could last Japan for 800 years.
In December last year, officials from the Japanese Marine Research and Development Agency announced that they would test the extraction of deep-sea muds rich in rare elements near Nan-tou Island in early 2026. IC Photo
However, Gakuji Makoto, a professor at Tokyo University in Japan, said, "If we pursue the industrialization of rare earths, it is estimated that it will take another 10 years or more." Japanese media analysts believe that the industrial mining cost of the rare earth clay from Nanutou Island could be as high as 20 times that of rare earths in China.
Japan is also searching around the world for "potential mineral sources," such as Greenland, which ranks eighth in the world in rare earth reserves. Japan plans to send a delegation to assess the possibility of mining rare earths this summer, to pave the way for Japanese companies to invest in this area. However, the Greenland government and its residents are cautious or even opposed to the mining of rare earths, fearing its impact on local fisheries and the environment.
Japan also provided funding to support alternative producers such as Lynas Rare Earths in Australia. However, Lynas Rare Earths only produced 8 tons of dysprosium and terbium in the first quarter of 2026. By 2024, China could export about 14 tons of these minerals per month to Japan.
