New regulations from Beijing affect one of the most important customer countries for critical raw materials. This is further increasing uncertainty in the already tense markets.
On Tuesday, the Chinese government announced its Export controls for so-called dual-use goods to Japan tightened. All deliveries that could potentially be used in the Japanese military sector are banned with immediate effect, the Ministry of Trade announced.
Dual-use goods are products, software or technologies that can be used for both civilian and military purposes. In recent years, China has continuously expanded its list of controlled goods and refers to the dual use of numerous materials. These include critical minerals such as certain rare earth elements and technology metals such as gallium and germanium. Japan is by far the most important recipient country for a number of Chinese exports of critical raw materials, especially rare earths, presumably also for the production of REE magnets, as Japan is one of the few countries that has an established industry centred around the manufacture of these components. The semiconductor industry is also dependent on Chinese raw materials, such as gallium and germanium.
Trade policy pressure on Japan's industry
Although the ban does not affect the entire Japanese industry, companies that are directly or indirectly linked to the military sector are effectively cut off from Chinese supplies. In addition, foreign organisations or individuals who violate these regulations can be prosecuted.
Jan Giese, Senior Manager Minor Metals & Rare Earths: „This is not the first time that China has resorted to trade policy pressure against Japan. Against this backdrop, the current announcement is more than just a technical rule change; it sends a clear signal. Even for one of the most important buyers of critical raw materials such as Japan, access to the Chinese raw material flow can no longer be taken for granted. In markets that are already tense, this further increases uncertainty.“
Security of supply in the face of growing tensions
Japan recognised its high dependence on imports of critical metals early on and has been managing the risk for years with targeted precautions. The state commodities agency Japan Oil, Gas and Metals National Corporation (JOGMEC) plays a central role in this, managing the build-up and coordination of strategic stocks of rare earths, for example. This targeted stockpiling minimises short-term supply shocks, but offers no long-term protection if export restrictions persist or are extended.
The background to this measure is the growing tensions between Beijing and Tokyo. Japan recently approved a record defence budget, in addition to statements by Prime Minister Sanae Takaichi on Taiwan, an area that China considers to be its territory.
This is how the share of Japanese imports for selected raw materials from China has developed
