Coded threats from China that it might restrict exports of rare earths to Japan have raised alarms across Japanese business and politics, signaling a sharp escalation in a monthslong geopolitical feud between the countries.
China’s Ministry of Commerce said it would ban the export to Japan of all “dual-use” items with potential military applications, citing national security concerns. The official announcement, issued on Tuesday, was vague on specific commodities. Government-affiliated media, however, said Beijing was considering whether to include certain rare earths among the items it was restricting.
The state-run China Daily reported that authorities were considering more stringent reviews for licenses to export so-called medium and heavy rare earths — scarce groups of metals found in devices ranging from electric vehicle motors to missile systems.
Shortly after the ministry’s announcement, the former head of the state-affiliated Global Times said on social media that a suspension of rare earth shipments “would strike an exceptionally broad range of industrial sectors,” and that “the possibility that anything could happen cannot be ruled out.”
For Japan, the menacing over rare earths draws on a familiar playbook. In 2010, during a territorial dispute, Beijing halted rare earth exports to Japan for two months. Nothing official was ever announced, but the move sent shock waves through the Japanese economy.
This time, China is likely planning to use protracted screening to ensure that rare earths are not diverted to military purposes and engineer a de facto export ban, according to Yoshikiyo Shimamine, a senior fellow at the Dai-ichi Life Research Institute.
Because rare earths are essential to a vast array of products, like the motors used by Japan’s car industry, they represent the most significant economic threat among the items subject to Beijing’s dual-use export controls, Mr. Shimamine said. “There is a risk that the impact on the economy could grow to a size that cannot be ignored,” he said.
China last year sent global supply chains into spasms by introducing strict licensing protocols for rare earths, prompting a scramble by the United States and European Union to secure new sources. China’s threat to cut off rare-earth supplies helped pressure the United States into softening its stance on semiconductor equipment export controls.
Japan has spent much of the past 15 years diversifying its supply chains and has cut its reliance on Chinese rare earths to around 60 to 70 percent today, from 90 percent in 2010. But China still dominates production, and Japan also depends almost entirely on China for heavy rare earths, such as dysprosium and terbium.
A three-month export restriction by China would result in a loss of production in Japan of about $4.3 billion, according to the Nomura Research Institute, an economic research and consulting firm. Should the restrictions persist for a full year, the losses are projected to swell to $17 billion, it said.
The Nikkei 225, Japan’s benchmark stock index, fell more than 1 percent on Wednesday.
Japan has been bracing for a retaliatory move targeting rare earths following remarks made in November by the prime minister, Sanae Takaichi, that suggested Japan could deploy its military if China uses force to try to seize Taiwan. In recent weeks, China has also urged Chinese tourists to reconsider travel to Japan and reinstated a longstanding ban on Japanese seafood imports.
China’s Ministry of Commerce took an additional trade action against Japan on Wednesday. It accused Japanese companies of flooding China with cheap exports of a key material used in chip making in an attempt to hurt Chinese manufacturers.
Mr. Shimamine of the Dai-ichi Life Research Institute said he expects Beijing to continue adding economic pressure on Japan, and he noted that Tokyo’s options for retaliation remain limited. “Japan is heavily dependent on China economically, and it doesn’t have massive political or military power,” he said.
On Tuesday, Masaaki Kanai, a director-general at Japan’s Foreign Ministry, protested China’s announcement and demanded the export controls be removed, according to the ministry. The measures “deviate significantly from international practice” and are “absolutely unacceptable and deeply regrettable,” Mr. Kanai said.
Hisako Ueno and Siyi Zhao contributed reporting.
River Akira Davis covers Japan for The Times, including its economy and businesses, and is based in Tokyo.
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