TOKYO: When China announced sweeping export controls on rare earths this year, the reaction was immediate and anxious. Policymakers in Washington, Brussels and beyond scrambled to assess the damage. These little-known minerals sit at the heart of modern life—powering electric vehicles, smartphones and advanced weapons—and overnight they became a geopolitical flashpoint.
In Japan, though, the news stirred something closer to a bad memory.
China still dominates the global rare-earth supply chain, especially the complex and messy processing stage. Japan knows what that kind of dependence can cost. In 2010, a territorial dispute abruptly cut off Chinese exports, sending shockwaves through Japan’s economy. Fifteen years later, as the U.S. and its allies race to loosen China’s grip, Japan’s long, expensive effort to diversify offers a hard-earned lesson in what resilience really looks like.
“The urgency is only now sinking in for the United States and Europe,” said Naoki Kobayashi of Japan’s trade ministry. “For Japan, this lesson was painful—and it came 15 years ago.”
The shock that changed everything
The turning point came suddenly. In September 2010, a collision near disputed islands between a Chinese fishing trawler and Japanese coast guard vessels escalated into a diplomatic crisis. Japan detained the ship’s captain. China responded by quietly halting rare-earth exports for two months.
At first, even senior officials didn’t grasp the scale of the threat. Tatsuya Terazawa, then a top economic policymaker at the trade ministry, remembers an auto-industry official rushing into his office, visibly alarmed.
Japan’s car factories, the official warned, could soon grind to a halt.
“I had zero knowledge about rare earths,” Terazawa admitted later. He quickly learned that these obscure elements were essential to the magnets used in electric motors across Japan’s auto industry—and that China controlled almost all of them.
Shaken, Terazawa pushed through a policy package worth more than US$1 billion (S$1.30 billion) to reduce Japan’s exposure. Critics said it was overkill. Terazawa disagreed. “I was determined that Japan would never repeat this,” he said.
A risky bet on an outsider
That determination soon met opportunity. Japanese trading house Sojitz and the government-backed agency Jogmec were searching for suppliers beyond China. At the same time, Lynas, a small Australian mining company, was running out of money.
Lynas was trying to do what no one else had managed: build a rare-earth supply chain that completely bypassed China. It planned to mine ore in Australia and refine it in Malaysia—but the idea was expensive, controversial, and unfinished.
“For us, Lynas was the only option,” said Sojitz CEO Kosuke Uemura. Without alternative supplies, he said, factories across Japan could be forced to shut down.
In 2011, Jogmec and Sojitz stepped in with $250 million in loans and equity. The deal secured Japan a long-term source of rare earths outside China—and gave Lynas a lifeline.
Today, workers fly into Lynas’ remote Mount Weld mine in Western Australia to extract rare-earth ore. It travels thousands of miles to Malaysia for chemical separation, then onward to Japan, where Sojitz distributes the refined materials to magnet makers supplying companies like Toyota.
Progress that didn’t come cheap
Japan’s gamble paid off—partly. China once supplied more than 90% of Japan’s rare earths. Today, that figure has fallen to around 60% to 70%.
However, diversification came at a cost. Refining rare earths produces hazardous waste, including acidic runoff and low-level radioactive residue. Managing it safely is expensive and politically sensitive.
Lynas’ Malaysian plant was delayed for years by protests, lawsuits, and regulatory hurdles. Only after multiple revisions to its waste management plans did it finally begin full operations.
Chinese processors, by contrast, often operate under looser rules, giving them a decisive cost advantage.
“If we were to compete normally with China, we’d be playing on a different field altogether,” Uemura said. Without government support, he added, the gap is “absolutely unbridgeable.”
The threat returns
China’s latest export controls—rolled out in April and expanded in October to include processing technology—revived old fears. Even though some restrictions were temporarily eased after talks with Washington, the warning was unmistakable: reliance on China remains a strategic risk.
The U.S. has responded by investing heavily in domestic mining, processing and magnet production, and by signing cooperation agreements with allies including Japan, Australia and the European Union.
Japan’s experience suggests such pressure tactics can backfire. “Once trust is broken, it doesn’t fully come back,” said William Pesek of Yardeni Research. China lifted its 2010 embargo within months, he noted, but Japan never returned to the old status quo.
A moment of truth
For Japanese officials, today’s global scramble is both validating and frustrating. After years of quietly shouldering the burden alone, Tokyo now sees a chance for genuine international cooperation—especially on the toughest issue of all: cost.
If countries commit to buying more non-Chinese rare earths, officials say, scale could finally make alternative supply chains competitive. Japan, with its hard-won experience connecting mines to manufacturers, could help lead the effort.
Still, Terazawa remains cautious. He spent years urging closer cooperation, including during the first Trump administration, with little success.
“The real question,” he said, “is why this didn’t happen over the past 15 years.”
The agreements on paper are promising. Now comes what he calls the real test: “Is the U.S. truly committed to working with its allies?”
For Japan, the stakes are clear. It has already lived through what happens when the supply suddenly disappears—and it doesn’t want to relive that lesson again.
