Japan firms seen ‘stockpiling’ rare earths as Tokyo looks to G7 in face of China controls

Fears of China choking off exports of critical minerals to Japan amid a deepening political dispute have set off industry alarms and prompted Tokyo to elevate the issue at a G7 gathering of finance ministers this week, despite Beijing’s assurances that civilian trade would be spared.

Japanese Finance Minister Satsuki Katayama said last week that she would attend the Group of Seven event in Washington on Monday with the “risk of a rare-earth-supply interruption from China in mind”, the Tokyo-based Jiji Press reported. Officials from Canada, the United States and Australia were also expected to participate.

The inclusion of rare earths on the G7 agenda reflects heightened concern in Japan over China controlling exports of 17 rare earth elements that are crucial for Japan’s massive manufacturing sector, from consumer electronics to vehicles, according to analysts.

Although Japan has reduced its reliance on Chinese rare earths since 2010, when China stopped rare earth exports for two months following a vessel collision near disputed islets, it still depends heavily on Chinese supplies, as replacements take time, the experts said.

“They have an immediate problem, and they need to find sources,” said Rajiv Biswas, CEO of Singapore-based research firm Asia-Pacific Economics.

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Analysts say businesses remain on edge because China processes about 90 per cent of the world’s rare earths, as estimated by the Centre for Strategic and International Studies think tank, and sells them at relatively low prices.