When China shocked global markets this year with new export controls on rare earths, many governments scrambled. Japan did not. Tokyo has been living this nightmare for 15 years – and has already spent the better part of a decade and a half building an escape route, the New York Times reported.
Rare earths are a small group of metals used in everything from electric vehicle motors and wind turbines to smartphones, defence systems and advanced electronics. China dominates both mining and, even more crucially, processing. That grip gives Beijing enormous leverage. Japan discovered that the hard way in 2010.
The 2010 wake-up call
In September 2010, a collision between a Chinese trawler and Japanese Coast Guard vessels near disputed islands spiralled into a diplomatic crisis. Beijing’s response was blunt: an unannounced embargo on rare earth exports to Japan that lasted about two months.
Inside Japan’s trade ministry, officials initially did not grasp the scale of the threat. That changed when auto industry officials warned that the entire car supply chain could grind to a halt. Rare earths are essential for the high-performance magnets used in motors, especially in hybrid and electric vehicles.
At the time, more than 90 percent of Japan’s rare earths came from China. The episode exposed just how vulnerable an advanced economy can be when a single supplier controls a critical chokepoint.
The ministry responded with a roughly $1 billion package to diversify supply, support recycling and fund alternatives. Some thought it was overkill. Officials like Tatsuya Terazawa, then a senior economic policymaker, argued they had no choice if Japan wanted to avoid reliving 2010.
Finding Lynas and building a non-Chinese chain
The key breakthrough was a partnership with Lynas, an Australian miner trying to create the world’s first major rare earth supply chain outside China. Lynas had ore at Mount Weld in Western Australia and plans for a refinery in Malaysia – but not enough money to scale.
Japanese trading giant Sojitz and state-backed resource agency JOGMEC stepped in. In 2011 they provided around $250 million in loans and equity to Lynas in exchange for long-term supply to Japan. That effectively underwrote a non-Chinese route from mine to magnet.
The chain is long and expensive. Ore is mined in remote Western Australia, partially processed and shipped about 5,000 miles to Lynas’s refinery in Kuantan, Malaysia. There it is chemically separated into individual rare earth oxides. From Malaysia, material travels another 3,000 miles to Japan, where Sojitz distributes it to magnet makers supplying companies like Toyota.
This route was politically and environmentally contentious. The Malaysian plant faced fierce local protests, court challenges and delays over radioactive and toxic waste. Lynas had to repeatedly revise its residue management plans. Tight regulation and higher costs stand in stark contrast to often lightly regulated or illegal Chinese processors.
The result: the non-Chinese chain is far cleaner, but also far more expensive. As Sojitz chief executive Kosuke Uemura admits, competing with China on cost alone is “a different field altogether” and essentially impossible without public support.
How far Japan has come – and what remains
Japan has not fully escaped China’s orbit, but it has loosened the grip. Industry estimates say Chinese-origin supplies now account for roughly 60–70 percent of Japan’s rare earth imports, down from over 90 percent in 2010. Sojitz has steadily expanded the mix of rare earths it sources from Lynas, including more specialised, heat-resistant magnet materials.
Yet vulnerabilities remain. The refining bottleneck is still a major constraint, and Japan’s alternative chain depends on continued political support in Malaysia and sustained subsidies at home. The system works, but it is not cheap.
Lessons for the US and others
China’s latest export controls, even when partially suspended under a truce with Washington, have jolted other capitals. The US is trying to catch up, backing mining at Mountain Pass in California and funding processing and magnet plants in North Carolina and Texas, while signing cooperation deals with Australia, the EU and Japan.
Japan’s experience offers three clear lessons.
First, diversification takes time. Tokyo’s journey began in crisis and is still incomplete 15 years later. Second, cost parity with China is unrealistic; governments must be prepared to pay for redundancy and resilience. Third, trust, once damaged by export threats, is hard to restore — which is why countries keep diversifying even after formal restrictions are lifted.
For Japan, the rare earth struggle is no longer an abstract strategic issue. It is a lived memory and a long-term project. For the US and Europe, the question now is whether they are willing to match that level of patience, money and political will to reduce their own dependence on Beijing’s critical minerals.